EconomyxAI · Beige Book Sector Monitor January 1998Released January 21, 1998 · Data through January 12 |
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Conditions index +0.36 avg of 11 sectors, −2 to +2 |
| Outlook index +0.15 sectors with an outlook |
| Districts growing 12/12 per National Summary |
| Positive momentum 4/11 sectors improving |
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This release in brief The read | ■ | Growth stayed moderate as 1997 closed. | | ■ | Holiday retail sales recovered late to meet or slightly beat expectations, with heavy discounting; light trucks and SUVs carried auto sales. | | ■ | Manufacturing stayed fairly strong but showed signs of easing, and the Asian crisis began cutting exports of equipment, metals, lumber and semiconductors. | | ■ | Construction and commercial real estate were strong, with rising rents and the first speculative building in years; lending was brisk, led by commercial loans and refinancing. | | ■ | Labor markets were tight or very tight everywhere and shortages began to cancel projects, but prices were generally flat on competition and cheaper imports. |
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Sector prospects Where the 3–12 month view points Strongest prospects Real Estate
XLRE
▶ Steady | +0.57 |
| Consumer Discretionary
XLY
▶ Steady | +0.36 |
| Communication Services
XLC
▶ Steady | +0.32 |
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| Weakest prospects Materials
XLB
▼ Turning down | −0.26 |
| Information Technology
XLK
▼ Weakening | −0.20 |
| Financials
XLF
▶ Steady | −0.02 |
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All 11 GICS sectors, ranked Sector scoreboard | # | Sector | −1 0 +1 | Score | Signal | Now | Outlook | Mom. |
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| 1 | Real Estate
XLRE | | +0.57 | Favorable | +0.96 | +0.45 | ▶ +0.12 | | 2 | Consumer Discretionary
XLY | | +0.36 | Leaning Favorable | +0.49 | +0.66 | ▶ −0.07 | | 3 | Communication Services
XLC | | +0.32 | Leaning Favorable | +0.40 | n/a | ▶ +0.20 | | 4 | Energy
XLE | | +0.23 | Leaning Favorable | +1.12 | +0.00 | ▶ +0.15 | | 5 | Industrials
XLI | | +0.21 | Leaning Favorable | +0.62 | +0.36 | ▼ −0.60 | | 6 | Health Care
XLV | | +0.11 | Neutral | +0.12 | n/a | ▶ +0.09 | | 7 | Utilities
XLU | | +0.03 | Neutral | +0.00 | n/a | ▶ +0.00 | | 8 | Consumer Staples
XLP | | +0.00 | Neutral | +0.05 | n/a | ▶ −0.06 | | 9 | Financials
XLF | | −0.02 | Neutral | +0.29 | +0.81 | ▶ −0.18 | | 10 | Information Technology
XLK | | −0.20 | Leaning Unfavorable | +0.09 | −0.50 | ▼ −0.47 | | 11 | Materials
XLB | | −0.26 | Leaning Unfavorable | −0.18 | −0.70 | ▼ −0.57 |
Prospect Score blends current conditions, district outlooks, momentum, a sector-specific macro tilt and margins. Now = weighted current conditions; Outlook = n/a when too few districts gave one; Mom. = change vs the average of the two prior releases. |
National Summary, scored −2 to +2 Macro backdrop | Overall Economic Activity | | +1.00 |
All districts described moderate growth at year-end; Dallas grew at a slightly slower pace and Richmond's manufacturing slowed sharply, but Boston and Minneapolis were strong. | Labor markets were tight or very tight in every district, and reports of firms scaling back production or canceling projects because of shortages became more common. | | Inflation Pressure (higher = headwind) | | +0.00 |
Prices were generally flat: intense competition and lower import prices held goods prices steady, with increases limited to hotel rooms, commercial rents and some services. | Lending was brisk, led by commercial loans and mortgage refinancing as rates fell; New York and Minneapolis saw softer loan demand and consumer lending stayed sluggish. | Business contacts were broadly optimistic about 1998 (Minneapolis, St. Louis, Philadelphia), but manufacturers worried the Asian turmoil and strong dollar would hurt 1998 sales and profits, and San Francisco's outlook was more tempered. |
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Current conditions in each Fed district District by sector | BOS | NY | PHL | CLE | RIC | ATL | CHI | STL | MIN | KC | DAL | SF |
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| Information TechnologyXLK | +1 | · | · | · | · | · | · | · | +1 | · | · | · | | Health CareXLV | +1 | · | · | · | · | · | · | · | +1 | · | · | · | | FinancialsXLF | +1 | −1 | +1 | +1 | · | +1 | +1 | +1 | · | +1 | · | +1 | | Consumer DiscretionaryXLY | +1 | +1 | · | +1 | +1 | +1 | +1 | · | +1 | · | · | · | | Communication ServicesXLC | · | · | · | · | · | · | · | · | · | · | · | +1 | | IndustrialsXLI | +2 | −1 | +1 | +2 | −1 | · | +1 | +1 | +1 | +1 | · | +1 | | Consumer StaplesXLP | · | · | · | · | · | · | · | +1 | · | · | · | · | | EnergyXLE | · | · | · | · | · | +1 | · | · | +1 | +1 | +2 | · | | UtilitiesXLU | · | · | · | · | · | · | · | · | · | · | · | · | | Real EstateXLRE | +2 | +1 | +1 | +1 | +1 | · | +1 | · | +1 | · | +2 | +1 | | MaterialsXLB | · | · | +1 | · | · | · | · | · | · | · | · | −1 |
| Contraction | −2 | −1 | 0 | +1 | +2 | Expansion |
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Top highlights What moved the scores Energy +2 Dallas Demand for oil field services 'remained very strong', with inadequate capacity. Why it matters: Dallas carries 45% of Energy weight; a +2 keeps Energy high despite falling oil prices. | Industrials +2 Cleveland Capital goods shipments near record; truck order books full through midyear. Why it matters: A +2 in a heavy-industry district lifts Industrials and its outlook. | Industrials +2 Boston Almost all manufacturers report business up, half with double-digit gains. Why it matters: Second +2 for Industrials, outweighing Richmond's sharp slowdown. | Real Estate +2 Boston, Dallas Rents up 12.5% in Boston (30% for prime space); Dallas office rents rising sharply. Why it matters: Two +2s make Real Estate one of the strongest sectors. | Information Technology 0 San Francisco Slowing of orders for telecommunications equipment. Why it matters: San Francisco is 47% of IT; moving from +1 to 0 cuts weighted IT sharply. | Financials −1 New York Softer loan demand, especially consumer loans and residential mortgages. Why it matters: New York is 28% of Financials and outweighs several +1 districts. |
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Twelve Fed districts District roundup Boston Growing +1.0 Outlook ▲ Economy is strong; sales up, prices stable. |
| New York Growing +1.0 Generally positive picture; housing strengthening. |
| Philadelphia Growing +1.0 Outlook ▲ Moderate growth continued; contacts expect more. |
| Cleveland Growing +1.0 Business conditions remain strong overall. |
| Richmond Growing +1.0 Outlook ▲ Expanded moderately despite sharp manufacturing slowdown. |
| Atlanta Growing +1.0 Outlook ▲ Continued to expand moderately through year-end. |
| Chicago Growing +1.0 Outlook ▲ Continued to expand moderately; momentum slowing slightly. |
| St. Louis Growing +1.0 Outlook ▲ Signs of continued moderate growth; contacts optimistic. |
| Minneapolis Growing +1.0 Outlook ▲ Strong, steady stride, but not sprinting. |
| Kansas City Growing +1.0 Outlook ▲ Continued to grow moderately; construction slightly slower. |
| Dallas Growing +1.0 Outlook ▶ Grew at a slightly slower pace. |
| San Francisco Growing +1.0 Outlook ▲ Favorable conditions; more tempered 1998 outlook. |
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Where the signal is thin or split Divergences to watch | Industrials — Boston and Cleveland +2 offset Richmond and New York -1; New York's 9% weight trims the weighted score only slightly.
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| | Information Technology — San Francisco (47% weight) drops to 0 from +1 in November as telecom equipment orders slow, so weighted IT falls further toward neutral.
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| | Financials — New York -1 at 28% weight again pulls weighted Financials below the count of eight +1 districts.
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| | Consumer Discretionary — San Francisco 0 (disappointing holiday sales) lowers the weighted reading despite eight positive districts.
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| | CONSUMER STAPLES and UTILITIES: almost no directional coverage.
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How to read this. Each Fed district’s report is scored −2 (strong contraction) to +2 (strong expansion) for each GICS sector, then weighted by the district’s share of that sector’s activity. The Prospect Score blends current conditions (25%), district outlooks (35%), momentum (20%), a sector-specific macro tilt (10%) and margin pressure (10%). The Beige Book describes regional activity, not earnings or valuations. Weights and sensitivities are illustrative. This newsletter is for information only and is not investment advice. Source: Federal Reserve Beige Book · Scored by EconomyxAI |