EconomyxAI · Sector Watch October 2007Released October 17, 2007 |
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Conditions index +0.06 avg of 11 sectors, −2 to +2 |
| Outlook index +0.00 sectors with an outlook |
| Districts growing 7/12 per National Summary |
| Positive momentum 2/11 sectors improving |
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This release in brief The read | ■ | Released October 17, 2007, with information collected before early October 2007 (date not printed in the PDF). | | ■ | Activity expanded in all districts in September and early October but growth decelerated since August; seven districts held their pace while Cleveland, Dallas, Kansas City, Richmond and San Francisco slowed. | | ■ | Consumer spending grew unevenly and more slowly, with weak department, discount and home-durables sales and weaker vehicle sales; tourism was solid. | | ■ | Manufacturing and services kept expanding as export demand offset weakness tied to housing; home sales, prices and construction fell further, while lenders tightened standards amid rising delinquencies. | | ■ | Contacts reported unusually high uncertainty; labor markets stayed tight with shortages in many occupations, and input costs rose on energy, raw materials, food and a weaker dollar. |
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Sector prospects Where the 3–12 month view points Strongest prospects Information Technology
XLK
▶ Steady | +0.37 |
| | Health Care
XLV
▶ Steady | +0.23 |
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| Weakest prospects Real Estate
XLRE
▶ Steady | −0.63 |
| Financials
XLF
▲ Turning up | −0.37 |
| Consumer Discretionary
XLY
▶ Steady | −0.13 |
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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 | Information Technology
XLK | | +0.37 | Leaning Favorable | +0.50 | +0.50 | ▶ +0.17 | | 2 | Energy
XLE | | +0.34 | Leaning Favorable | +0.61 | +0.50 | ▶ −0.03 | | 3 | Health Care
XLV | | +0.23 | Leaning Favorable | +0.25 | +0.50 | ▶ −0.14 | | 4 | Industrials
XLI | | +0.06 | Neutral | +0.21 | +0.00 | ▼ −0.21 | | 5 | Consumer Staples
XLP | | +0.05 | Neutral | +0.00 | +0.00 | ▶ +0.00 | | 6 | Communication Services
XLC | | −0.00 | Neutral | +0.00 | +0.00 | ▶ +0.00 | | 7 | Materials
XLB | | −0.01 | Neutral | −0.08 | +0.00 | ▶ +0.08 | | 8 | Utilities
XLU | | −0.02 | Neutral | +0.00 | +0.00 | ▶ +0.00 | | 9 | Consumer Discretionary
XLY | | −0.13 | Neutral | −0.03 | +0.00 | ▶ −0.18 | | 10 | Financials
XLF | | −0.37 | Leaning Unfavorable | −0.33 | −0.50 | ▲ −0.01 | | 11 | Real Estate
XLRE | | −0.63 | Unfavorable | −0.45 | −1.00 | ▶ −0.27 |
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 in all districts but decelerated since August; five districts slowed. | Labor markets tight with widespread shortages, but job growth eased in some regions and wage pressures softened. | | Inflation Pressure (higher = headwind) | | −0.75 |
Upward pressure on input costs in most districts from energy, raw materials, food and a weaker dollar; pass-through mixed. | Delinquencies up and credit quality slightly worse; lenders tightened standards for consumers and all types of real estate. | Higher-than-usual uncertainty; housing expected to stay subdued for months; cautious optimism that spillovers are limited. |
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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 | +1 | · | · | · | +1 | · | · | · | · | | FinancialsXLF | · | −1 | · | · | −1 | · | · | +1 | · | −1 | · | · | | Consumer DiscretionaryXLY | · | · | +1 | −1 | −1 | · | · | +1 | · | · | · | · | | Communication ServicesXLC | · | · | · | · | · | · | · | · | · | · | · | · | | IndustrialsXLI | +1 | +1 | +1 | −1 | +1 | −1 | · | +1 | +1 | · | −1 | +1 | | Consumer StaplesXLP | · | · | · | · | · | · | · | · | · | · | · | · | | EnergyXLE | · | · | · | · | · | · | · | · | +1 | +1 | +1 | · | | UtilitiesXLU | · | · | · | · | · | · | · | · | · | · | · | · | | Real EstateXLRE | · | +1 | −1 | · | −1 | −1 | −1 | · | −1 | · | · | −1 | | MaterialsXLB | · | · | · | · | · | · | · | · | +1 | · | −1 | · |
| Contraction | −2 | −1 | 0 | +1 | +2 | Expansion |
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Top highlights What moved the scores Real Estate −1 Philadelphia, Richmond, Atlanta, Chicago, Minneapolis, San Francisco Home sales fell further under tighter credit. Why it matters: Broad Real Estate drag. | Financials −1 New York Weaker loan demand; standards tightened. Why it matters: Largest Financials weight. | Financials −1 Richmond, Kansas City Loan demand softened; quality declined. Why it matters: Financials drag. | Industrials −1 Cleveland, Atlanta, Dallas Manufacturing output flat to declining. Why it matters: Industrials drag. | Industrials +1 Boston, Richmond, San Francisco Aerospace and defense demand strong. Why it matters: Industrials support. | Real Estate +1 New York Manhattan apartment sales rebounded 60%. Why it matters: Real Estate offset. |
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Twelve Fed districts District roundup Boston Flat Outlook ▶ Conditions continue to be mixed. |
| New York Growing +0.5 Outlook ▲ Expanded at a moderate pace. |
| Philadelphia Growing +0.5 Outlook ▲ Business activity expanded. |
| Cleveland Flat Outlook ▶ Grew at a slower pace. |
| Richmond Flat Outlook ▶ Continued to cool. |
| Atlanta Flat Outlook ▶ Remained mixed. |
| Chicago Growing +0.5 Outlook ▲ Expanded at a modest pace. |
| St. Louis Growing +0.5 Outlook ▲ Expanded moderately. |
| Minneapolis Growing +0.5 Outlook ▲ Grew modestly. |
| Kansas City Growing +0.5 Outlook ▲ Expanded at a more modest pace. |
| Dallas Flat Outlook ▶ Decelerated. |
| San Francisco Growing +0.5 Outlook ▲ Expanded; further deceleration. |
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Where the signal is thin or split Divergences to watch | Real Estate — Seven -1s match the deepest Real Estate reading since the downturn began.
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| | Industrials — Three -1s, including Dallas, narrow Industrials despite broad +1s elsewhere.
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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 |