EconomyxAI · Sector Watch March 1997Released March 12, 1997 · Data through March 3 |
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Conditions index +0.49 avg of 11 sectors, −2 to +2 |
| Outlook index +0.67 sectors with an outlook |
| Districts growing 10/12 per National Summary |
| Positive momentum 6/11 sectors improving |
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This release in brief The read | ■ | District economies continued to expand at a relatively moderate pace, with San Francisco strong and Cleveland and St. Louis little changed. | | ■ | Retail sales were up from a year ago in most districts and beat plans in Atlanta, Boston and New York; Richmond had its fastest sales growth in several years. | | ■ | Manufacturing stayed at high levels with pockets of weakness: aircraft, auto suppliers, heavy trucks and furniture were strong, while apparel, textiles and paper contracted. | | ■ | Residential and commercial real estate were strong, with falling office vacancies and rising rents; loan demand was decidedly mixed and lending margins were thin. | | ■ | Labor markets were tight almost everywhere but wage gains stayed at 3 to 4 percent, and price increases were temperate; energy extraction picked up despite lower oil prices. |
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Sector prospects Where the 3–12 month view points Strongest prospects Real Estate
XLRE
▶ Steady | +0.67 |
| Consumer Discretionary
XLY
▲ Improving | +0.66 |
| Energy
XLE
▲ Improving | +0.49 |
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| Weakest prospects Utilities
XLU
▶ Steady | +0.00 |
| Materials
XLB
▼ Weakening | +0.05 |
| Health Care
XLV
▶ Steady | +0.07 |
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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 | | +0.67 | Favorable | +0.95 | +0.72 | ▶ +0.22 | | 2 | Consumer Discretionary
XLY | | +0.66 | Favorable | +0.93 | +0.90 | ▲ +0.27 | | 3 | Energy
XLE | | +0.49 | Leaning Favorable | +1.12 | n/a | ▲ +0.26 | | 4 | Industrials
XLI | | +0.43 | Leaning Favorable | +0.58 | +0.75 | ▶ −0.18 | | 5 | Information Technology
XLK | | +0.36 | Leaning Favorable | +0.66 | n/a | ▶ −0.02 | | 6 | Financials
XLF | | +0.31 | Leaning Favorable | +0.18 | +0.80 | ▶ +0.24 | | 7 | Communication Services
XLC | | +0.24 | Leaning Favorable | +0.40 | n/a | ▶ +0.00 | | 8 | Consumer Staples
XLP | | +0.20 | Leaning Favorable | +0.29 | n/a | ▶ +0.20 | | 9 | Health Care
XLV | | +0.07 | Neutral | +0.07 | n/a | ▶ +0.07 | | 10 | Materials
XLB | | +0.05 | Neutral | +0.21 | +0.20 | ▼ −0.34 | | 11 | Utilities
XLU | | +0.00 | Neutral | +0.00 | n/a | ▶ +0.00 |
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 |
Most districts continued to expand at a moderate pace; San Francisco reported strong growth and Minneapolis a quickening pace, while Cleveland and St. Louis reported little change and Chicago lost some momentum. | Contacts in almost every district had trouble finding and keeping workers, especially engineers, skilled manufacturing and high-tech staff; wage gains stayed in the 3 to 4 percent range, and Dallas and Kansas City saw wage pressure ease. | | Inflation Pressure (higher = headwind) | | +0.25 |
Price increases were temperate: retail prices mostly flat in five districts, productivity offset input costs, and oil and natural gas prices fell; only a few districts cited higher raw materials prices. | Loan demand was decidedly mixed, with more districts reporting declining or steady demand than rising; consumer standards tightened (Chicago, Cleveland, Richmond) while competition eased business terms and San Francisco reported healthy demand. | St. Louis contacts remain optimistic about the near term, San Francisco expects regional growth to outpace the nation, and Boston, Richmond, Kansas City and Dallas expect demand to rise; Atlanta retailers were cautious about spring. |
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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 | +1 | | Health CareXLV | · | · | · | · | +1 | · | · | · | · | · | · | · | | FinancialsXLF | +1 | · | · | · | · | · | · | −1 | · | −1 | · | +1 | | Consumer DiscretionaryXLY | +1 | +1 | · | · | +2 | +1 | +1 | · | +1 | +1 | +1 | +1 | | Communication ServicesXLC | · | · | · | · | · | · | · | · | · | · | · | +1 | | IndustrialsXLI | +1 | · | +1 | · | −1 | +1 | · | · | +1 | +1 | · | +2 | | Consumer StaplesXLP | · | · | · | · | +1 | · | · | · | · | · | · | +1 | | EnergyXLE | · | · | · | · | · | +1 | · | · | +1 | +1 | +2 | · | | UtilitiesXLU | · | · | · | · | · | · | · | · | · | · | · | · | | Real EstateXLRE | +1 | +1 | +1 | +1 | +2 | +1 | · | +1 | +1 | · | +1 | +1 | | MaterialsXLB | · | · | +1 | +1 | · | · | +1 | · | · | · | · | · |
| Contraction | −2 | −1 | 0 | +1 | +2 | Expansion |
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Top highlights What moved the scores Energy +2 Dallas Oil service demand 'extremely strong and growing' despite falling energy prices. Why it matters: Dallas carries 45% of Energy weight, so this read dominates the sector. | Industrials +2 San Francisco Booming aircraft industry and steady high-tech equipment expansion. Why it matters: San Francisco is 17% of Industrials and the only +2. | Consumer Discretionary +2 / +1 broad Richmond, Boston, New York, Atlanta Richmond sales grew at the fastest rate in several years; three districts beat plans. Why it matters: Ten of twelve districts non-negative lift Discretionary conditions. | Real Estate +1 broad, Richmond +2 eleven districts Strong residential and even stronger commercial markets; vacancies falling. Why it matters: Broad-based reads across high-weight New York, Atlanta and San Francisco. | Information Technology +1 broad San Francisco, Dallas, Boston, Minneapolis High-tech expansion in the Northwest; semiconductor and computer demand up in Dallas. Why it matters: San Francisco (47%) and Dallas (10%) carry most IT weight. | Industrials outlook +1 Boston, Philadelphia, Minneapolis, Dallas, San Francisco Four in ten Philadelphia plants plan to hire; Minnesota firms expect strong 1997 growth. Why it matters: Forward-looking: broad positive manufacturing outlooks lift the outlook component. |
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Twelve Fed districts District roundup Boston Growing +1.0 Outlook ▲ Fairly upbeat; manufacturers' sales 8 to 20 percent ahead. |
| New York Growing +1.0 Continued to improve; retail sales ahead of plan. |
| Philadelphia Growing +1.0 Outlook ▲ Mixed, but slight improvement on balance. |
| Cleveland Flat Outlook ▲ Good overall, but little net growth. |
| Richmond Growing +1.0 Outlook ▲ Advanced at a moderate pace; retail strongest in years. |
| Atlanta Growing +1.0 Outlook ▶ Expanding moderately; cautious on spring sales. |
| Chicago Growing +1.0 Expanding modestly, but lost some momentum. |
| St. Louis Flat Outlook ▶ High level; little or no change since last report. |
| Minneapolis Growing +1.0 Outlook ▲ Pace apparently quickening despite severe winter. |
| Kansas City Growing +1.0 Outlook ▲ Continued to grow moderately; energy improved. |
| Dallas Growing +1.0 Outlook ▲ Expanding at a modest pace. |
| San Francisco Growing +2.0 Outlook ▲ Strong pace of growth in most states. |
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Where the signal is thin or split Divergences to watch | Industrials — San Francisco +2 at 17% weight lifts the weighted score; Richmond's -1 is the only negative.
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| | Energy — Dallas +2 (45% weight) and three +1s give a strong weighted Energy score even as oil prices fell; margins turn slightly negative.
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| | Financials — New York (28%) is 0, and the two -1s are low-weight districts, so weighted Financials sits near zero while San Francisco's +1 helps.
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| | Health Care — a single Richmond +1 at 7% weight; coverage is very thin.
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| | Utilities — no coverage, read as neutral by default.
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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 |