EconomyxAI · Sector Watch October 2001Released October 24, 2001 |
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Conditions index −0.62 avg of 11 sectors, −2 to +2 |
| Outlook index −0.43 sectors with an outlook |
| Districts growing 0/12 per National Summary |
| Positive momentum 1/11 sectors improving |
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This release in brief The read | ■ | The first report after the September 11 attacks. | | ■ | Every district reported weak activity; the attacks caused a short, sharp drop in spending, and retail sales other than autos stayed slightly below pre-attack levels. | | ■ | Zero-percent financing revived auto sales in all districts except Boston and New York, while hotels, airlines and tourism fell sharply nearly everywhere. | | ■ | Manufacturing was weak almost everywhere, with aircraft orders down sharply and most districts expecting no turnaround until 2002. | | ■ | Layoffs spread across many industries, and wages and prices were steady to falling; insurance premiums and security costs rose. |
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Sector prospects Where the 3–12 month view points Strongest prospects Consumer Staples
XLP
▶ Steady | +0.21 |
| Utilities
XLU
▶ Steady | −0.04 |
| Health Care
XLV
▼ Turning down | −0.08 |
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| Weakest prospects Consumer Discretionary
XLY
▼ Turning down | −0.95 |
| Real Estate
XLRE
▼ Turning down | −0.71 |
| Industrials
XLI
▼ Turning down | −0.67 |
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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 | Consumer Staples
XLP | | +0.21 | Leaning Favorable | +0.29 | n/a | ▶ +0.20 | | 2 | Utilities
XLU | | −0.04 | Neutral | +0.00 | n/a | ▶ −0.07 | | 3 | Health Care
XLV | | −0.08 | Neutral | +0.00 | n/a | ▼ −0.18 | | 4 | Communication Services
XLC | | −0.37 | Leaning Unfavorable | −0.40 | n/a | ▼ −0.33 | | 5 | Financials
XLF | | −0.43 | Leaning Unfavorable | −0.74 | +0.31 | ▶ −0.26 | | 6 | Materials
XLB | | −0.49 | Leaning Unfavorable | −0.69 | −0.50 | ▶ −0.01 | | 7 | Information Technology
XLK | | −0.60 | Unfavorable | −0.80 | −0.50 | ▼ −0.28 | | 8 | Energy
XLE | | −0.60 | Unfavorable | −0.55 | −0.82 | ▼ −0.46 | | 9 | Industrials
XLI | | −0.67 | Unfavorable | −1.34 | −0.38 | ▼ −0.55 | | 10 | Real Estate
XLRE | | −0.71 | Unfavorable | −1.03 | −0.46 | ▼ −0.78 | | 11 | Consumer Discretionary
XLY | | −0.95 | Unfavorable | −1.53 | −0.65 | ▼ −0.98 |
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 | | −0.75 |
All twelve districts reported weak activity in September and early October; the attacks caused a short, sharp drop on top of weakness already in train. | Layoffs and plant closings reported in many industries and regions; Dallas says the labor market softened dramatically and Chicago reports a surge in initial claims. | | Inflation Pressure (higher = headwind) | | −0.75 |
Most districts report steady or declining consumer prices, falling manufactured-goods and input prices, and little wage change; insurance premiums were the main exception. | Lower rates sparked heavy mortgage refinancing, but business and consumer loan demand fell, delinquencies rose in several districts and standards tightened in Atlanta, Kansas City and New York. | Most districts do not expect a manufacturing turnaround until 2002, and retailers lowered holiday forecasts amid greater uncertainty. |
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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 | · | · | −2 | −1 | | Health CareXLV | · | · | · | · | · | · | · | · | · | · | · | · | | FinancialsXLF | +1 | −2 | · | · | · | · | · | · | · | −1 | −1 | −1 | | Consumer DiscretionaryXLY | −1 | −2 | −1 | −1 | −1 | −2 | −1 | · | · | −1 | −2 | −2 | | Communication ServicesXLC | · | · | · | · | · | · | · | · | · | · | · | −1 | | IndustrialsXLI | −2 | · | −1 | −1 | · | −1 | −2 | −1 | −1 | −1 | −2 | −2 | | Consumer StaplesXLP | · | · | · | · | +1 | · | · | · | · | · | · | +1 | | EnergyXLE | · | · | · | · | · | · | · | · | · | −1 | −1 | · | | UtilitiesXLU | · | · | · | · | · | · | · | · | · | · | · | · | | Real EstateXLRE | · | −2 | · | · | · | −1 | −1 | · | −1 | −1 | −2 | −1 | | MaterialsXLB | · | · | · | −1 | · | −1 | −1 | · | −1 | · | −1 | −1 |
| Contraction | −2 | −1 | 0 | +1 | +2 | Expansion |
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Top highlights What moved the scores Industrials −2 San Francisco Boeing announced plans for sharp reductions in production and employment due to weak air travel demand. Why it matters: San Francisco is a large Industrials district; a -2 here pulls the weighted score down sharply. | Consumer Discretionary −2 New York Manhattan store sales 20-30 percent below normal; hotel occupancy 25 percent below normal. Why it matters: New York carries a large Discretionary weight, so the -2 drives the weighted national reading. | Industrials −2 Chicago "This is the worst business environment I have seen in my 29-year career." Why it matters: Chicago is the heaviest manufacturing district; its -2 is the biggest single drag on Industrials. | Consumer Discretionary −2 San Francisco, Atlanta, Dallas Travel and tourism plummeted; Hawaii visits down 25-30 percent, Florida theme parks well below normal. Why it matters: Three large districts at -2 make Discretionary one of the weakest sectors. | Financials −2 New York Demand for most loan types fell noticeably; standards tightened; job market weak in financial services. Why it matters: New York dominates Financials weighting, so its -2 sets the sector's direction. | Industrials −2 Dallas Manufacturing accelerated its decline; airline demand down roughly 30 percent. Why it matters: Dallas adds a third -2 among heavy-weight Industrials districts. |
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Twelve Fed districts District roundup Boston Contracting −1.0 Outlook ▼ Activity below year-earlier; few expect improvement before 2H 2002. |
| New York Contracting −1.0 Outlook ▼ Conditions weakened; Manhattan real estate, retail and tourism hit. |
| Philadelphia Contracting −1.0 Outlook ▶ Slowed mid-September, picked up slowly; manufacturers expect gains. |
| Cleveland Contracting −1.0 Outlook ▼ General downward drift continued; little optimism for near term. |
| Richmond Contracting −1.0 Outlook ▶ Activity contracted slightly as consumers pulled back. |
| Atlanta Contracting −1.0 Outlook ▼ Significantly affected by attacks; sluggish pace expected. |
| Chicago Contracting −1.0 Activity slowed further; no mention of bottoming in manufacturing. |
| St. Louis Contracting −1.0 Outlook ▶ Activity continued to slow, particularly manufacturing. |
| Minneapolis Contracting −1.0 Weakened since Sept. 11; tourism, manufacturing, mining down. |
| Kansas City Contracting −1.0 Outlook ▼ Economy weakened; manufacturing slump worsened. |
| Dallas Contracting −1.0 Outlook ▼ Weakened further; manufacturing decline accelerated, energy weaker. |
| San Francisco Contracting −1.0 Outlook ▼ Activity slowed as attacks added to underlying weakness. |
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Where the signal is thin or split Divergences to watch | Industrials — Airline, hotel and aircraft weakness concentrated in high-weight districts (Chicago, Dallas, San Francisco), pushing the weighted score below the unweighted average.
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| | Consumer Discretionary — New York and San Francisco, two of the largest districts, scored -2, so the weighted score is weaker than the simple average.
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| | Communication Services — Thin coverage; only San Francisco's media and advertising layoffs scored. Telecom equipment weakness (Dallas) scored under IT.
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| | Health Care & Utilities — Barely discussed; scored 0 throughout. Rising health insurance costs are a cost, not an activity signal.
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| | District validation: every district scored -1 overall; St. Louis and Minneapolis sector averages are milder because retail was flat there.
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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 |