EconomyxAI · Beige Book Sector Monitor October 1998Released November 4, 1998 · Data through October 26 |
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Conditions index +0.02 avg of 11 sectors, −2 to +2 |
| Outlook index −0.57 sectors with an outlook |
| Districts growing 7/12 per National Summary |
| Positive momentum 3/11 sectors improving |
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This release in brief The read | ■ | The pace of expansion moderated amid signs of slowing in some sectors. | | ■ | Manufacturing slowed in 11 of 12 districts, with steel hit by a dramatic surge in imports and agricultural equipment makers cutting output. | | ■ | Real estate and construction stayed generally robust, especially housing, but tighter credit standards slowed commercial real estate. | | ■ | Two-thirds of districts reported tighter business lending standards, citing a less favorable outlook, while low rates fueled record mortgage refinancing. | | ■ | Virtually all districts said businesses and consumers were cautious; input prices were flat to down and wage pressure stayed subdued. |
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Sector prospects Where the 3–12 month view points Strongest prospects Communication Services
XLC
▶ Steady | +0.30 |
| Health Care
XLV
▶ Steady | +0.09 |
| Utilities
XLU
▶ Steady | −0.02 |
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| Weakest prospects | Materials
XLB
▼ Turning down | −0.65 |
| Industrials
XLI
▼ Weakening | −0.19 |
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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 | Communication Services
XLC | | +0.30 | Leaning Favorable | +0.47 | n/a | ▶ +0.07 | | 2 | Health Care
XLV | | +0.09 | Neutral | +0.12 | n/a | ▶ +0.08 | | 3 | Utilities
XLU | | −0.02 | Neutral | +0.00 | n/a | ▶ −0.06 | | 4 | Real Estate
XLRE | | −0.07 | Neutral | +0.88 | −0.64 | ▼ −0.42 | | 5 | Consumer Discretionary
XLY | | −0.08 | Neutral | +0.52 | −0.40 | ▼ −0.26 | | 6 | Financials
XLF | | −0.08 | Neutral | +0.07 | −0.50 | ▶ −0.42 | | 7 | Consumer Staples
XLP | | −0.10 | Neutral | +0.00 | n/a | ▶ −0.11 | | 8 | Information Technology
XLK | | −0.13 | Neutral | −0.10 | n/a | ▲ +0.14 | | 9 | Industrials
XLI | | −0.19 | Leaning Unfavorable | −0.13 | −0.09 | ▼ −0.45 | | 10 | Materials
XLB | | −0.65 | Unfavorable | −0.64 | −0.79 | ▼ −0.34 | | 11 | Energy
XLE | | −0.74 | Unfavorable | −0.96 | −1.00 | ▶ −0.17 |
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 |
Expansion moderated in September and October; manufacturing slowed in 11 of 12 districts and retail came in at or below expectations, though construction stayed robust. | Labor markets stayed very tight in most districts, but manufacturing employment fell in nearly half, Dallas reported marked slackening, and wage pressure stayed subdued. | | Inflation Pressure (higher = headwind) | | −0.50 |
Input prices declined for most producers while output prices were flat; Dallas said discussion of price increases was virtually nonexistent, with steel, cement, lumber and petrochemicals all down. | Loan demand was strong and refinancing at records, but two-thirds of districts tightened business credit standards and nonbank credit 'dried up' in high yield. | Virtually all districts said businesses and consumers were cautious; Boston retailers split between recession and slowdown and San Francisco respondents grew pessimistic, though Philadelphia, Atlanta and Minneapolis saw a modestly improved outlook. |
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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 | · | · | · | · | · | · | · | +1 | · | · | · | | FinancialsXLF | −1 | · | · | +1 | +1 | · | +1 | +1 | · | · | −1 | · | | Consumer DiscretionaryXLY | +1 | · | · | +1 | +1 | · | · | · | +2 | +1 | · | +1 | | Communication ServicesXLC | · | · | · | · | · | · | · | · | · | · | +1 | +1 | | IndustrialsXLI | · | −1 | · | · | −1 | −1 | +1 | +1 | +1 | · | −1 | · | | Consumer StaplesXLP | · | · | · | · | · | · | · | · | · | · | · | · | | EnergyXLE | · | · | · | · | · | −1 | · | · | · | · | −2 | · | | UtilitiesXLU | · | · | · | · | · | · | · | · | · | · | · | · | | Real EstateXLRE | +1 | +1 | · | +1 | +1 | · | +2 | +1 | +2 | · | +1 | +1 | | MaterialsXLB | −1 | · | · | −1 | · | −1 | −1 | · | −1 | · | −2 | · |
| Contraction | −2 | −1 | 0 | +1 | +2 | Expansion |
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Top highlights What moved the scores Energy −2 Dallas Oil-directed drilling near all-time lows; layoffs of 10-20% of workforces. Why it matters: Dallas carries the largest Energy weight, so a -2 keeps Energy at the bottom. | Materials −2 Dallas Lumber oversupply 'worst they've ever seen'; petrochemical profits 'rock bottom'. Why it matters: Dallas is a heavy Materials district; the -2 drives the sector sharply lower. | Materials −1 broad−based Boston, Cleveland, Atlanta, Chicago, Minneapolis Steel producers cite a dramatic increase in imported steel. Why it matters: Breadth of the steel and paper weakness makes Materials negative in both weighted and unweighted terms. | Information Technology 0 San Francisco Chip makers squeezed, but PC sales strengthened in recent weeks. Why it matters: San Francisco is about 47% of IT; moving from -1 to 0 lifts weighted IT. | Real Estate +2 Chicago, Minneapolis Housing 'exceptionally robust'; office building at an 11-year high. Why it matters: Keeps Real Estate the strongest sector as New York and San Francisco ease to +1. | Industrials −1 Richmond, Atlanta, Dallas, New York Manufacturing slowed in 11 of 12 districts. Why it matters: Four negatives pull Industrials below zero on a weighted basis. |
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Twelve Fed districts District roundup Boston Flat Outlook ▼ Economic conditions increasingly mixed. |
| New York Flat Growth slowed further; softening in a number of sectors. |
| Philadelphia Flat Outlook ▶ Steady in most sectors, some slowing. |
| Cleveland Growing +1.0 Business activity remains good overall. |
| Richmond Growing +1.0 Outlook ▶ Advanced at a moderate pace. |
| Atlanta Flat Outlook ▲ Activity weakened slightly; outlook positive. |
| Chicago Growing +1.0 Continued to expand; key segments softened. |
| St. Louis Growing +1.0 Outlook ▼ Still operating at a high level. |
| Minneapolis Growing +1.0 Outlook ▶ Output continues strong despite caution. |
| Kansas City Growing +1.0 Outlook ▼ Grew moderately; signs of easing mounting. |
| Dallas Flat Outlook ▼ Economic growth continued to slow. |
| San Francisco Growing +1.0 Outlook ▼ Moderate pace with slowing. |
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Where the signal is thin or split Divergences to watch | Materials — six districts negative and Dallas at -2 make Materials the most broadly weak sector this release.
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| | Energy — Dallas -2 dominates; weighted Energy is far worse than the unweighted average.
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| | Information Technology — San Francisco and Dallas recover to 0 on PC sales, so weighted IT improves even though Boston and Philadelphia turn negative.
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| | Financials — mixed, with Boston and Dallas negative and Cleveland, Richmond, Chicago and St. Louis positive.
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| | UTILITIES and CONSUMER STAPLES: 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 |