EconomyxAI · Sector Watch October 1997Released October 29, 1997 · Data through October 20 |
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Conditions index +0.49 avg of 11 sectors, −2 to +2 |
| Outlook index +0.81 sectors with an outlook |
| Districts growing 9/12 per National Summary |
| Positive momentum 3/11 sectors improving |
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This release in brief The read | ■ | Activity grew at a moderate to strong pace, with Minneapolis reporting its strongest economy in 30 years and San Francisco strong, while Dallas held steady at a high level. | | ■ | September retail sales were weaker than expected in many districts, with a pickup in October and optimism for the holidays; auto sales slowed and Kansas City and Philadelphia were soft. | | ■ | Manufacturing accelerated or stayed high with a positive outlook: aircraft, heavy and farm equipment, steel, heavy trucks and high-tech equipment were strong, while rail shipping bottlenecks hampered deliveries. | | ■ | Commercial real estate was strong with rising rents and some speculative building, residential was uneven, commercial lending was strong and consumer lending mixed. | | ■ | Labor shortages intensified but reports of wage pressure were infrequent, prices were generally stable, and oil service demand stayed extremely strong with equipment prices rising rapidly. |
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Sector prospects Where the 3–12 month view points Strongest prospects Industrials
XLI
▶ Steady | +0.72 |
| | Real Estate
XLRE
▼ Turning down | +0.50 |
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| Weakest prospects Communication Services
XLC
▼ Turning down | −0.00 |
| Health Care
XLV
▶ Steady | +0.01 |
| Utilities
XLU
▶ 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 | Industrials
XLI | | +0.72 | Favorable | +1.38 | +0.88 | ▶ +0.26 | | 2 | Energy
XLE | | +0.65 | Favorable | +1.02 | +1.00 | ▶ −0.10 | | 3 | Real Estate
XLRE | | +0.50 | Leaning Favorable | +0.81 | +0.50 | ▼ −0.14 | | 4 | Consumer Discretionary
XLY | | +0.36 | Leaning Favorable | +0.43 | +0.85 | ▼ −0.59 | | 5 | Information Technology
XLK | | +0.32 | Leaning Favorable | +0.66 | n/a | ▶ +0.23 | | 6 | Consumer Staples
XLP | | +0.17 | Leaning Favorable | +0.22 | n/a | ▶ +0.20 | | 7 | Financials
XLF | | +0.15 | Leaning Favorable | +0.64 | n/a | ▶ −0.07 | | 8 | Materials
XLB | | +0.05 | Neutral | +0.26 | n/a | ▶ −0.18 | | 9 | Utilities
XLU | | +0.02 | Neutral | +0.00 | n/a | ▶ +0.00 | | 10 | Health Care
XLV | | +0.01 | Neutral | +0.00 | n/a | ▶ −0.04 | | 11 | Communication Services
XLC | | −0.00 | Neutral | +0.00 | n/a | ▼ −0.20 |
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 |
Activity grew at a moderate to strong pace; Minneapolis reported its strongest economy in 30 years and San Francisco and Cleveland were strong, while New York growth moderated, Philadelphia was mixed and Dallas held at roughly August's level. | Labor shortages intensified across districts, with creative recruiting, signing bonuses and help-wanted ads up 30 percent in South Dakota; Kansas City saw more wage increases, though most districts reported wage pressure infrequently. | | Inflation Pressure (higher = headwind) | | +0.25 |
Prices were generally stable at retail; office rents, oil equipment prices and some construction materials rose, while petrochemical prices weakened and firms resisted input increases. | Commercial lending was strong in several districts and New York banks were more willing to lend at lower rates, while consumer lending was mixed, Philadelphia loans edged down and spreads stayed very narrow. | San Francisco expects continued strong U.S. performance with regional growth outpacing the nation, manufacturers' outlooks were positive, and retailers in Chicago, Atlanta and Dallas were optimistic for the holidays. |
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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 | · | · | · | · | · | · | · | · | · | · | · | · | | FinancialsXLF | +1 | +1 | −1 | · | +1 | · | +1 | · | · | +1 | · | +1 | | Consumer DiscretionaryXLY | +1 | · | −1 | · | · | +1 | · | +1 | +2 | −1 | · | +1 | | Communication ServicesXLC | · | · | · | · | · | · | · | · | · | · | · | · | | IndustrialsXLI | +1 | +1 | +1 | +1 | +2 | +1 | +2 | +1 | +1 | +1 | +1 | +2 | | Consumer StaplesXLP | · | · | · | · | · | · | · | · | · | · | · | +1 | | EnergyXLE | · | · | · | · | · | +1 | · | · | +1 | · | +2 | · | | UtilitiesXLU | · | · | · | · | · | · | · | · | · | · | · | · | | Real EstateXLRE | +1 | +1 | · | · | +1 | +1 | +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 Industrials +2 Richmond, Chicago, San Francisco Manufacturing surged; contractors 'inundated'; aircraft and high-tech booming. Why it matters: Three +2s and every district positive push Industrials to the top. | Energy +2 Dallas Oil service demand 'remained extremely strong'; equipment prices at early-1980s levels. Why it matters: Dallas carries 45% of Energy weight; margins also strong. | Consumer Discretionary 0 New York, Chicago, Dallas September sales below plan or expectations, picking up in October. Why it matters: High-weight districts flat pull Discretionary below September's peak. | Information Technology +1 broad San Francisco, Boston, Dallas, Minneapolis Booming high-tech equipment; semiconductors ramping up; microprocessor demand up. Why it matters: San Francisco (47%) positive for a second release keeps IT firm. | Financials +1 New York, Chicago, San Francisco Banks more willing to lend at lower rates; business lending strong. Why it matters: High-weight districts positive; Philadelphia the only negative. | Consumer Discretionary +2 Minneapolis Strongest economy in 30 years; consumers spending, tourism improved. Why it matters: Strong read but low district weight limits its effect. |
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Twelve Fed districts District roundup Boston Growing +1.0 Outlook ▲ Moderate growth; aircraft parts and networking strong. |
| New York Flat Growth moderated; retail below plan in September. |
| Philadelphia Flat Mixed; manufacturing moderate, retail below year-ago. |
| Cleveland Growing +1.0 Outlook ▲ Strong; factory output high, orders improved. |
| Richmond Growing +1.0 Outlook ▲ Moderate expansion from a high level. |
| Atlanta Growing +1.0 Outlook ▲ Moderate growth; holiday and tourism outlook bright. |
| Chicago Growing +1.0 Outlook ▲ Moderate growth; construction robust, steel very high. |
| St. Louis Growing +1.0 Outlook ▲ High level of activity; contacts optimistic. |
| Minneapolis Growing +2.0 Outlook ▲ Strongest economy in 30 years. |
| Kansas City Growing +1.0 Outlook ▲ Grew moderately, with a few signs of easing. |
| Dallas Flat Outlook ▲ Roughly the same level as August. |
| 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 — three +2s and no district below +1 give the broadest Industrials read of the year.
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| | Information Technology — San Francisco +1 (47%) and Dallas +1 keep weighted IT above the unweighted count of four +1 reads.
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| | Consumer Discretionary — Minneapolis +2 carries little weight (about 2%), while New York, Chicago and Dallas at 0 pull weighted Discretionary down from September.
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| | Financials — New York +1 (28%) and San Francisco +1 (16%) keep weighted Financials positive despite Philadelphia's -1.
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| | HEALTH CARE, COMMUNICATION SERVICES and UTILITIES: 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 |