EconomyxAI · Sector Watch July 1997Released August 6, 1997 · Data through July 28 |
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Conditions index +0.46 avg of 11 sectors, −2 to +2 |
| Outlook index +0.33 sectors with an outlook |
| Districts growing 12/12 per National Summary |
| Positive momentum 5/11 sectors improving |
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This release in brief The read | ■ | Activity expanded at a moderate rate in many districts and more briskly in several, with New York, Richmond and Dallas picking up and San Francisco robust. | | ■ | Consumer spending picked up with warmer weather, especially in New York, Richmond and Minneapolis; Kansas City was the only district with weaker sales, and auto sales were slightly softer. | | ■ | Manufacturing stayed high or expanded across most industries, led by nonautomotive durables, heavy equipment, heavy trucks, aircraft and energy equipment; textiles, apparel and some metals were weak. | | ■ | Commercial real estate strengthened further with falling vacancies and rising rents; home sales and construction rose modestly but lagged a year ago, and commercial lending strengthened while mortgage rates eased. | | ■ | Labor markets tightened further but wage pressure was scattered, prices for most goods were stable, and oil and gas activity stayed very strong despite lower crude prices. |
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Sector prospects Where the 3–12 month view points Strongest prospects Industrials
XLI
▶ Steady | +0.58 |
| | Consumer Discretionary
XLY
▲ Turning up | +0.51 |
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| Weakest prospects Consumer Staples
XLP
▶ Steady | −0.08 |
| Information Technology
XLK
▶ Steady | −0.01 |
| Communication Services
XLC
▼ Turning down | +0.01 |
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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 | Industrials
XLI | | +0.58 | Favorable | +0.97 | +0.85 | ▶ +0.12 | | 2 | Energy
XLE | | +0.56 | Favorable | +1.12 | +0.50 | ▶ +0.09 | | 3 | Consumer Discretionary
XLY | | +0.51 | Favorable | +0.76 | +0.63 | ▲ +0.34 | | 4 | Real Estate
XLRE | | +0.49 | Leaning Favorable | +0.75 | +0.02 | ▶ −0.12 | | 5 | Materials
XLB | | +0.29 | Leaning Favorable | +0.50 | n/a | ▶ +0.04 | | 6 | Financials
XLF | | +0.21 | Leaning Favorable | +0.69 | −0.50 | ▶ +0.01 | | 7 | Health Care
XLV | | +0.05 | Neutral | +0.08 | n/a | ▶ −0.03 | | 8 | Utilities
XLU | | +0.02 | Neutral | +0.00 | n/a | ▶ +0.00 | | 9 | Communication Services
XLC | | +0.01 | Neutral | +0.00 | n/a | ▼ −0.20 | | 10 | Information Technology
XLK | | −0.01 | Neutral | +0.17 | +0.50 | ▶ −0.24 | | 11 | Consumer Staples
XLP | | −0.08 | Neutral | +0.05 | n/a | ▶ −0.06 |
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 | | +1.25 |
Activity expanded at a moderate rate in many districts and more briskly in several; New York and Richmond grew faster, Dallas picked up and San Francisco reported robust conditions, while Kansas City showed a few signs of slowing. | Labor markets tightened further: seven districts reported shortages of skilled workers, Chicago and San Francisco said shortages curbed production, and entry-level and clerical wages rose in Richmond, Chicago and Kansas City. | | Inflation Pressure (higher = headwind) | | +0.00 |
Prices for most goods were stable and competition prevented increases; gasoline and crude oil prices fell, offset only by higher lumber and some farm prices. | Commercial lending strengthened in several districts, New York banks lowered loan rates across all categories and became more willing to lend, and lower mortgage rates lifted Richmond and Cleveland demand; Cleveland and Kansas City tightened some standards. | San Francisco respondents remain sanguine, with nearly all expecting trend or above-trend growth; St. Louis and Chicago contacts are optimistic and Dallas retailers upbeat, while Richmond service firms again lowered expectations. |
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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 | · | · | · | · | · | · | · | · | · | · | · | | FinancialsXLF | +1 | · | +1 | +1 | +1 | +1 | +1 | +1 | · | +1 | +1 | +1 | | Consumer DiscretionaryXLY | +1 | +2 | +1 | +1 | +2 | +1 | +1 | · | +1 | −1 | +1 | · | | Communication ServicesXLC | · | · | · | · | · | · | · | · | · | · | · | · | | IndustrialsXLI | +1 | +1 | +1 | +1 | +1 | · | +2 | +1 | +1 | · | +1 | +1 | | Consumer StaplesXLP | · | · | +1 | · | · | · | · | · | · | · | · | · | | EnergyXLE | · | · | · | · | · | +1 | · | · | +1 | +1 | +2 | · | | UtilitiesXLU | · | · | · | · | · | · | · | · | · | · | · | · | | Real EstateXLRE | +1 | +1 | · | +1 | +1 | · | +1 | +1 | +1 | −1 | +1 | +1 | | MaterialsXLB | · | · | · | · | · | +1 | +1 | · | −1 | · | +1 | +1 |
| Contraction | −2 | −1 | 0 | +1 | +2 | Expansion |
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Top highlights What moved the scores Energy +2 / +1 Dallas, Atlanta, Minneapolis Oil service activity 'still booming'; North Dakota exploration at a decade high. Why it matters: Dallas (45%) and broad support from other energy districts. | Industrials +2 Chicago Virtually all manufacturing sectors report increased production and strong orders. Why it matters: Chicago is 14% of Industrials; with eleven non-negative districts the sector strengthens. | Consumer Discretionary +2 New York, Richmond July sales 'well above plan'; Richmond retail revenue growth accelerated. Why it matters: Sharp rebound from June lifts Discretionary momentum. | Financials +1 broad ten districts Commercial loan demand remained strong; loans at large St. Louis banks up 1.5 percent. Why it matters: Broadest positive Financials read of the year. | Consumer Discretionary −1 Kansas City Retail sales edged down and were little changed from a year ago. Why it matters: The only negative Discretionary read. | Industrials outlook +1 Chicago, St. Louis, San Francisco Manufacturers report 'high expectations'; truck parts sales expected to keep beating plans. Why it matters: Forward-looking support for Industrials. |
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Twelve Fed districts District roundup Boston Growing +1.0 Outlook ▲ Expanding at a moderate pace; prices little changed. |
| New York Growing +1.0 Expanded somewhat faster, led by consumer rebound. |
| Philadelphia Growing +1.0 Outlook ▲ Improved moderately; pickup continuing into July. |
| Cleveland Growing +1.0 Outlook ▲ Expanding amid extremely low joblessness. |
| Richmond Growing +1.0 Outlook ▶ Grew at a faster rate, led by services and retail. |
| Atlanta Growing +1.0 Outlook ▲ Growth remains moderate; Louisiana oil boom. |
| Chicago Growing +1.0 Outlook ▲ Moderate expansion; manufacturing picked up. |
| St. Louis Growing +1.0 Outlook ▲ Growing at a moderate pace; contacts optimistic. |
| Minneapolis Growing +1.0 Continued moderate growth; construction indefatigable. |
| Kansas City Growing +1.0 Outlook ▶ Grew moderately, with a few signs of slowing. |
| Dallas Growing +1.0 Outlook ▲ Activity picked up; energy still booming. |
| San Francisco Growing +2.0 Outlook ▲ Robust economic conditions. |
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Where the signal is thin or split Divergences to watch | Information Technology — San Francisco (47%) at 0 for a second release keeps weighted IT low despite two +1 reads.
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| | Consumer Discretionary — New York +2 (10%) helps, but San Francisco 0 (26%) keeps the weighted score below the unweighted average.
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| | Financials — ten +1 reads, though New York (28%) at 0 holds the weighted score below the unweighted average.
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| | COMMUNICATION SERVICES and UTILITIES: no directional coverage.
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| | Energy — Dallas +2 and three +1s keep Energy at the top on conditions despite lower crude prices.
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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 |