Fed Beige Book-Kansas City: Econ Expanded Moderately -1 ...

WASHINGTON (MNI) ? The following is the latest Beige Book survey of
economic conditions in the Federal Reserve?s Tenth District, published
Wednesday:

TENTH DISTRICT ? KANSAS CITY

The Tenth District economy expanded moderately in June. Consumer
spending was stronger than expected due to stronger automobile sales and
a solid start to summer tourism. Commercial and residential real estate
prices rose with stronger sales, and District contacts were optimistic
regarding future sales and construction activity. Led by mortgage loan
activity, some District banks reported improvements in loan demand and
quality. District manufacturing activity edged up and additional gains
in production, orders, and capital spending were expected in the coming
months. Expanding drought conditions hindered crop development and drove
crop prices higher. District oil and natural gas drilling activity held
at peak levels but was expected to ease with lower global demand. The
price of raw materials for manufacturing rose at a slower pace compared
to previous surveys and finished goods prices generally held steady.
Wage pressures were subdued except for positions in transportation,
high-tech and energy industries.

Consumer Spending.

Consumer spending improved with stronger than expected sales in
June and was expected to strengthen further in the coming months.
District retailers reported increased sales, particularly for seasonal
items, mid-priced appliances, apparel, and fashion accessories. Several
high-end retailers, however, commented that economic uncertainty had
slowed demand for luxury items. Auto sales climbed sharply and were
expected to remain solid for the next few months with more dealers
offering sales incentives and discounts. Fuel-efficient cars sold well,
while demand for large, expensive cars and trucks remained weak.
Restaurant sales increased more than expected as both the number of
diners and average check amounts edged up in June. Tourism activity
ramped up with the start of the summer vacation season, though wildfires
in Colorado hurt traffic in the Rocky Mountain region. District hotel
owners reported a sharp rise in occupancy at higher average room rates
and expected bookings to remain strong during the next three months.

Manufacturing and Other Business Activity.

Manufacturing and transportation activity edged up in June and
sales at high-tech service firms rose modestly. Following a moderate
rebound in May, District factory activity edged higher in June and
remained well above year-ago levels, with stronger production at food
processing and aircraft manufacturers. The volume of new orders fell in
June but was expected to rebound and provide a moderate boost to
production during the next six months. A rise in the volume of shipments
reduced order backlogs and trimmed finished goods inventories. Capital
spending held steady, but fewer plant managers were hiring as the
average work week declined. Most manufacturers indicated that the
economic situation in Europe indirectly affected business activity by
increasing the uncertainty surrounding global economic conditions and
future demand. After easing in the last survey period, transportation
activity picked up, particularly in the trucking industry. A modest rise
in sales at high-tech firms fell short of expectations but several
companies anticipated stronger sales in the months ahead.

Real Estate and Construction.

Stronger residential home sales reduced home inventories and
commercial construction activity grew in June. A sharp increase in home
sales reduced home inventories, particularly for low- and mid-priced
houses. Stronger sales supported a moderate increase in home prices and
real estate contacts expected additional sales and price gains during
the next three months. Residential mortgage lenders saw an upswing in
loan applications for home purchases while home loan refinancing
activity was stable. Sales at construction supply firms remained solid
and some building materials were in short supply. Builders, however,
reported a lull in new home starts following the spring construction
rush, but building activity was expected to pick up during the next
three months. After climbing during the last survey period, new
commercial construction edged up and was expected to rise further with
more projects in the planning stages. Commercial real estate prices
firmed with stronger sales activity, and real estate contacts noted
owners were making fewer concessions to facilitate deals. Commercial
real estate rents rose as vacancy rates fell further. Developers
reported little change in access to credit.

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** MNI Washington Bureau: 202-371-2121 **

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Source: http://www.forexlive.com/blog/2012/07/18/fed-beige-book-kansas-city-econ-expanded-moderately-1/

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