EconomyxAI · Sector Watch January 2026Released January 14, 2026 · Data through January 5 |
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Conditions index −0.00 avg of 11 sectors, −2 to +2 |
| Outlook index +0.07 sectors with an outlook |
| Districts growing 8/12 per National Summary |
| Positive momentum 7/11 sectors improving |
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This release in brief The read | ■ | Activity rose slightly to modestly in eight districts, three were unchanged and one (New York) declined modestly, an improvement on the prior three reports. | | ■ | Consumer spending grew slightly to modestly on holiday sales, led by higher-income households; lower- and middle-income consumers were price sensitive and auto sales were flat to down. | | ■ | Employment was mostly unchanged, with hiring largely to backfill, more use of temporary workers and AI explored mainly for productivity; wage growth returned to 'normal'. | | ■ | Prices grew moderately in most districts as firms that had absorbed tariff costs began passing them on; energy and insurance costs strained margins, and firms expect some moderation ahead. | | ■ | Outlooks were mildly optimistic, with most districts expecting slight to modest growth; manufacturers in New York, Philadelphia and Cleveland were more upbeat, while Dallas and Chicago stayed cautious. |
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Sector prospects Where the 3–12 month view points Strongest prospects Consumer Discretionary
XLY
▲ Turning up | +0.42 |
| Utilities
XLU
▶ Steady | +0.24 |
| Financials
XLF
▶ Steady | +0.19 |
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| Weakest prospects Energy
XLE
▼ Turning down | −0.71 |
| Materials
XLB
▶ Steady | −0.31 |
| Industrials
XLI
▼ Turning down | −0.20 |
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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 | Consumer Discretionary
XLY | | +0.42 | Leaning Favorable | +0.59 | +0.37 | ▲ +1.18 | | 2 | Utilities
XLU | | +0.24 | Leaning Favorable | +0.34 | n/a | ▶ +0.21 | | 3 | Financials
XLF | | +0.19 | Leaning Favorable | +0.20 | +0.30 | ▶ +0.26 | | 4 | Health Care
XLV | | +0.13 | Neutral | +0.17 | −0.50 | ▶ +0.21 | | 5 | Real Estate
XLRE | | +0.13 | Neutral | +0.17 | +0.20 | ▲ +0.51 | | 6 | Consumer Staples
XLP | | +0.01 | Neutral | +0.11 | n/a | ▶ +0.20 | | 7 | Information Technology
XLK | | −0.01 | Neutral | +0.07 | +0.50 | ▶ −0.20 | | 8 | Communication Services
XLC | | −0.04 | Neutral | −0.15 | n/a | ▶ +0.04 | | 9 | Industrials
XLI | | −0.20 | Leaning Unfavorable | −0.34 | +0.19 | ▼ −0.49 | | 10 | Materials
XLB | | −0.31 | Leaning Unfavorable | −0.56 | +0.50 | ▶ −0.23 | | 11 | Energy
XLE | | −0.71 | Unfavorable | −0.65 | −1.00 | ▼ −0.64 |
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 | | +0.50 |
Eight districts grew slightly to modestly, three were unchanged and only New York declined; the national summary calls this an improvement over the last three cycles, when most districts reported little change. | Employment mostly unchanged (eight districts no change); hiring mainly to backfill and more temporary workers; New York and Minneapolis declined slightly, Philadelphia rose modestly. | | Inflation Pressure (higher = headwind) | | +1.00 |
Prices grew moderately in most districts, with tariff pass-through starting as pre-tariff inventories ran down, plus energy and insurance costs; firms expect some moderation. Slightly below November's 1.25. | Falling rates lifted lending in Cleveland, Atlanta, St. Louis, Dallas and San Francisco and loosened Chicago financial conditions; offset by tighter standards in New York, St. Louis business loans and Dallas. | Mildly optimistic: most districts expect slight to modest growth; Boston outlook improved, Philadelphia nonmanufacturers turned positive, San Francisco improved slightly; Chicago expects a slight decline and Dallas stayed cautious. |
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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 | · | · | · | · | · | · | · | · | · | · | · | | Health CareXLV | +1 | · | · | · | · | · | · | · | · | · | +1 | · | | FinancialsXLF | · | −1 | · | +1 | · | +1 | +1 | +1 | · | · | +1 | +1 | | Consumer DiscretionaryXLY | +1 | · | −1 | −1 | +1 | +1 | +1 | +2 | +1 | · | · | +1 | | Communication ServicesXLC | · | −1 | · | · | · | · | · | · | · | · | · | · | | IndustrialsXLI | · | −1 | · | +1 | −1 | · | −1 | +1 | −2 | +1 | · | −1 | | Consumer StaplesXLP | · | · | · | · | · | +1 | · | · | · | · | · | · | | EnergyXLE | · | · | · | · | · | · | · | · | · | −2 | −1 | · | | UtilitiesXLU | · | · | · | · | · | +1 | · | · | · | · | · | +1 | | Real EstateXLRE | −1 | +1 | −1 | +1 | · | · | +1 | +1 | −1 | · | · | · | | MaterialsXLB | · | · | · | · | · | −1 | −1 | · | · | · | −1 | −1 |
| Contraction | −2 | −1 | 0 | +1 | +2 | Expansion |
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Top highlights What moved the scores Energy −2 / −1, outlook −1 Kansas City, Dallas Oil prices below profitable levels; firms expect lower oil prices and a slight decline in completions. Why it matters: Dallas carries 45% of Energy weight; both conditions and outlook are negative, putting Energy at the bottom of the forward ranking. | Industrials outlook +0.5 to +1 Philadelphia, Cleveland, New York, Boston Manufacturers 'more optimistic'; just over half of Philadelphia firms expect more orders and shipments. Why it matters: Forward-looking: outlooks are well ahead of mixed current factory conditions, lifting the Industrials outlook component. | Financials +1 broad−based Cleveland, Atlanta, Chicago, St. Louis, Dallas, San Francisco Loan demand grew moderately; financial conditions loosened modestly; Dallas banking 'a bright spot'. Why it matters: Six positive districts including San Francisco (16%) outweigh New York's -1 despite its 28% weight. | Consumer Discretionary +2 St. Louis Consumer spending increased moderately on stronger-than-expected late holiday sales. Why it matters: The only +2 read, adding to broad holiday-driven gains in eight districts. | Consumer Discretionary 0 / +1 K−shaped New York, Dallas, San Francisco Luxury sold well while mid-to-lower end goods slumped; low- and middle-income households traded down. Why it matters: Bifurcation holds the three largest-weight Discretionary districts at or near neutral. | Industrials −2 Minneapolis Manufacturing decreased moderately; more than half of contacts reported lower orders. Why it matters: The only -2 Industrials read; Minneapolis weight is small, so it trims rather than flips the sector. |
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Twelve Fed districts District roundup Boston Growing +1.0 Outlook ▲ Edged up; outlook improved with less tariff caution. |
| New York Contracting −1.0 Outlook ▶ Continued to decline modestly; little improvement expected. |
| Philadelphia Growing +1.0 Outlook ▲ Rebounded to slight growth from a modest decline. |
| Cleveland Growing +1.0 Outlook ▲ Increased slightly; continued slight growth expected. |
| Richmond Growing +1.0 Grew modestly; travel up, manufacturing down slightly. |
| Atlanta Growing +1.0 Outlook ▲ Grew slightly; retail and travel up modestly. |
| Chicago Flat Outlook ▼ Little changed; slight decline expected over the next year. |
| St. Louis Growing +1.0 Increased modestly after the shutdown ended. |
| Minneapolis Flat Outlook ▶ Flat; employment down slightly, manufacturing contracted. |
| Kansas City Growing +1.0 Outlook ▲ Rose slightly on service sales and factory orders. |
| Dallas Flat Outlook ▼ Held steady; banking a bright spot, outlooks cautious. |
| San Francisco Growing +1.0 Outlook ▲ Expanded modestly; outlook improved slightly. |
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Where the signal is thin or split Divergences to watch | Information Technology — Boston's +1 is the only IT read and carries 7% weight; San Francisco (47%) stays at 0, so weighted IT conditions are small and thinly covered.
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| | Consumer Discretionary — eight of twelve districts positive on holiday sales, but the growth was led by higher-income households, and Philadelphia and Cleveland were negative.
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| | Industrials — evenly split (three positive, four negative plus Minneapolis -2); outlooks are clearly more positive than current conditions, a potential inflection.
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| | Energy — Kansas City -2 and Dallas -1 with negative outlooks in both; Dallas carries 45% of Energy weight, making Energy the weakest forward read.
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| | Financials — six positive districts on falling rates against a New York -1, which carries 28% of the weight and narrows the weighted score.
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| | UTILITIES and COMMUNICATION SERVICES: thin coverage; Atlanta and San Francisco utilities are the only Utilities reads and New York information the only Comm Services read.
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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 |