EconomyxAI · Sector Watch June 1997Released June 18, 1997 · Data through June 9 |
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Conditions index +0.46 avg of 11 sectors, −2 to +2 |
| Outlook index +0.29 sectors with an outlook |
| Districts growing 9/12 per National Summary |
| Positive momentum 4/11 sectors improving |
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This release in brief The read | ■ | All twelve district economies expanded, with pockets of weakness and capacity constraints restraining some industries; Atlanta reported mostly slower growth. | | ■ | Consumer spending growth slowed, with cool weather hurting seasonal goods; sales were weak in Atlanta, 'downshifted' in Dallas and below plan in New York, while Minneapolis was brisk; auto sales slowed in several districts. | | ■ | Manufacturing remained at high levels and grew in most districts, led by aerospace, steel and heavy equipment; shipments were at record levels in Richmond and capacity was tightening in San Francisco. | | ■ | Construction and commercial real estate were strong but home sales slowed from early-year levels; lending was mixed, with strong commercial demand, intense competition and tighter consumer standards. | | ■ | Labor markets tightened further with some wage increases, energy, metals and real estate prices rose, but competition held final goods prices in check. |
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Sector prospects Where the 3–12 month view points Strongest prospects | Industrials
XLI
▲ Improving | +0.65 |
| Real Estate
XLRE
▶ Steady | +0.45 |
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| Weakest prospects Information Technology
XLK
▼ Turning down | −0.14 |
| Consumer Staples
XLP
▶ Steady | −0.10 |
| Utilities
XLU
▶ Steady | +0.00 |
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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 | Energy
XLE | | +0.78 | Favorable | +1.06 | +0.94 | ▶ +0.00 | | 2 | Industrials
XLI | | +0.65 | Favorable | +1.02 | +0.77 | ▲ +0.39 | | 3 | Real Estate
XLRE | | +0.45 | Leaning Favorable | +0.84 | +0.36 | ▶ −0.08 | | 4 | Materials
XLB | | +0.42 | Leaning Favorable | +0.52 | −0.50 | ▶ +0.22 | | 5 | Financials
XLF | | +0.36 | Leaning Favorable | +0.82 | +0.30 | ▲ +0.47 | | 6 | Communication Services
XLC | | +0.31 | Leaning Favorable | +0.40 | n/a | ▲ +0.20 | | 7 | Consumer Discretionary
XLY | | +0.18 | Leaning Favorable | +0.15 | +0.63 | ▼ −0.67 | | 8 | Health Care
XLV | | +0.03 | Neutral | +0.07 | n/a | ▶ −0.04 | | 9 | Utilities
XLU | | +0.00 | Neutral | +0.00 | n/a | ▶ +0.00 | | 10 | Consumer Staples
XLP | | −0.10 | Neutral | +0.00 | n/a | ▶ −0.26 | | 11 | Information Technology
XLK | | −0.14 | Neutral | +0.14 | −0.50 | ▼ −0.54 |
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 twelve districts expanded, but there were pockets of weakness and capacity constraints; consumer spending growth slowed and Atlanta reported mostly slower growth, while San Francisco was strong and Richmond brisk. | Labor markets tightened in five districts and shortages persisted in five more, spreading to skilled blue-collar and entry-level jobs; pressure to raise wages increased in Dallas, Minneapolis and St. Louis. | | Inflation Pressure (higher = headwind) | | +0.50 |
Energy prices rose again (oil $20-22 in Dallas), along with some metals, chemicals, office rents and home prices, but competition restrained final goods prices. | Lending was mixed: commercial demand strong and competition relaxed credit terms (Chicago, Dallas, St. Louis), while consumer standards tightened in Cleveland, New York and Kansas City and loan rates rose in New York. | San Francisco expects national growth to stay on track at about 2 percent, Chicago builders and retailers are optimistic, and Kansas City expects sales to rise; Richmond service firms lowered expectations and Dallas contacts sense growth must slow. |
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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 | · | · | +1 | · | · | · | | Health CareXLV | · | · | · | · | +1 | · | · | · | · | · | · | · | | FinancialsXLF | +1 | +1 | +1 | · | +1 | +1 | +1 | · | · | +1 | · | +1 | | Consumer DiscretionaryXLY | +1 | · | · | · | +1 | · | +1 | · | +1 | +1 | −1 | · | | Communication ServicesXLC | · | · | · | · | · | · | · | · | · | · | · | +1 | | IndustrialsXLI | · | +1 | +1 | +1 | +1 | · | +1 | +1 | +1 | +1 | +1 | +2 | | Consumer StaplesXLP | · | · | · | · | · | · | · | · | · | · | · | · | | EnergyXLE | · | · | · | · | · | +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, outlook +1 Dallas Return on investment 'phenomenal', creating a rush to get wells drilled. Why it matters: Dallas carries 45% of Energy weight; conditions, outlook and margins all positive. | Industrials +2 San Francisco Aerospace leading the way; tightening capacity constraints noted. Why it matters: San Francisco is 17% of Industrials and the only +2. | Information Technology 0 San Francisco, Dallas Component capacity constraints, slower cellular phone demand, moderating computer spending. Why it matters: The two heaviest IT districts (57% combined) fall from +1 to 0, cutting IT conditions sharply. | Consumer Discretionary −1 / 0 Dallas, Atlanta, New York Dallas sales growth 'downshifted'; Atlanta sales weak; New York below plan. Why it matters: Breadth of softening drives the Discretionary decline from April. | Financials +1 broad New York, San Francisco, Chicago Loan demand strengthened at 40 percent of New York banks; strong demand in San Francisco. Why it matters: New York (28%) and San Francisco (16%) together lift Financials to its best reading this year. | Industrials outlook +1 Chicago, Minneapolis, San Francisco Heavy equipment orders booked well into next year; plant expansions announced. Why it matters: Forward-looking: supports the Industrials outlook component. |
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Twelve Fed districts District roundup Boston Growing +1.0 Outlook ▲ Sales growing; many firms adding staff. |
| New York Growing +1.0 Growth picked up despite cold weather. |
| Philadelphia Flat Outlook ▶ Improving slightly in some sectors, steady in others. |
| Cleveland Flat Mixed, with weather-related softness; still strong. |
| Richmond Growing +1.0 Outlook ▶ Growth remained brisk; retail lost some vigor. |
| Atlanta Flat Outlook ▶ Mostly slower growth; manufacturing weakening. |
| Chicago Growing +1.0 Outlook ▲ Moderate expansion continued. |
| St. Louis Growing +1.0 Outlook ▲ Steady, sustainable pace of growth. |
| Minneapolis Growing +1.0 Outlook ▲ Moderate growth with few problems. |
| Kansas City Growing +1.0 Outlook ▲ Continued to grow moderately. |
| Dallas Growing +1.0 Outlook ▶ Expanding at a modest pace. |
| San Francisco Growing +2.0 Outlook ▲ Strong performance; capacity constraints tightening. |
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Where the signal is thin or split Divergences to watch | Information Technology — San Francisco (47%) and Dallas (10%) both drop to 0, so weighted IT falls well below the unweighted count of three +1 reads.
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| | Consumer Discretionary — Dallas -1 at 12% weight and San Francisco at 0 (26%) pull weighted Discretionary below its unweighted average.
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| | Industrials — ten positive districts and San Francisco +2 give a broad, high weighted score.
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| | Energy — Dallas +2 at 45% weight again dominates, with outlook and margins positive.
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| | HEALTH CARE, STAPLES and UTILITIES: little or 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 |