Fed Beige Book: Conditions in CRE Improved Moderately

Overall Economic Activity

Economic activity expanded at a modest to moderate pace across the 12 Federal Reserve Districts in January and February. Consumer spending was mixed, as non-auto retail sales increased in just over half of the Districts while auto sales declined or were flat in every District. Tourism activity was broadly solid, with Atlanta and Richmond recording robust growth in this sector. On balance, Districts reported modest growth in home sales and construction, with the latter constrained by shortages of labor and materials. Conditions in the nonresidential real estate market improved moderately since the previous report, with robust construction activity noted in three Districts. Commercial rents in and around New York City were up significantly, according to contacts in the area. Increases in production were broad based across manufacturing sectors, with all but one District noting at least modest growth in activity. Loan volumes were generally flat, with a handful of Districts noting a modest decrease in delinquency rates. Among reporting Districts, agricultural sector activity was mixed but flat overall. Contacts in natural resource sectors saw modestly improving industry conditions, except in the Minneapolis District, where energy and mining activity was robust.

Tenth District- Kansas

Summary of Economic Activity

Economic activity in the Tenth District continued to increase at a modest pace in late January and February, and a faster pace of expansion was expected in the months ahead. Consumer spending picked up modestly, as growth in the retail and tourism sectors more than offset a decline in restaurant and auto sales. Manufacturing contacts reported moderate growth including an increase in production, shipments, new orders, order backlogs, and capital spending plans. Sales rose moderately at transportation, wholesale trade, and professional and high-tech firms, and further gains were anticipated in the months ahead. District real estate conditions expanded modestly as activity in both the residential and commercial sectors increased. Banking contacts reported steady loan demand, unchanged loan quality and credit conditions, and steady-to-decreasing deposits. Energy activity continued to grow a modest pace as production increased and the number of drilling rigs edged higher. Agricultural conditions across the District remained weak, and farm income fell further. Employment and employee hours rose modestly compared to the previous survey period. Wages increased slightly in most sectors, and contacts expected stronger wage growth in the months ahead. Input and selling prices rose moderately, with stronger price gains in the retail sector.

Real Estate and Construction

District real estate activity increased at a modest pace in late January and February, and additional gains were expected moving into the spring months. Residential home sales and home prices rose moderately compared to the previous survey period, and inventories declined at a moderate pace. Sales of low- and medium-priced homes continued to outpace sales of higher-priced homes. Residential sales and home prices were anticipated to rise, while inventories were expected to fall further in the months ahead. Residential construction activity expanded slightly as home starts and traffic of potential buyers rose, while construction supply sales were flat. Commercial real estate activity increased modestly as absorption, completions, construction underway, and sales increased, while vacancy rates declined. Activity in the commercial real estate sector was expected to expand at a modest pace moving forward.


Bankers reported steady overall loan demand in late January and February. A majority of respondents indicated stable demand for commercial and industrial, residential real estate, and consumer installment loans. Demand for commercial real estate loans increased modestly, while contacts reported mixed demand for agricultural loans. Most bankers indicated loan quality was unchanged compared to a year ago and expected loan quality to remain stable over the next six months. Credit standards remained largely unchanged in all major loan categories. Bankers reported steady-to-decreasing deposits.

Manufacturing and Other Business Activity
Manufacturing and other business activity expanded at a moderate pace in late January and February. Manufacturers reported sustained growth in production, particularly for metals, machinery, and plastics products. Shipments, new orders, and order backlogs grew at a modest pace, and activity was higher than a year ago. Manufacturers’ capital spending plans rose moderately, and firms’ expectations for future activity remained strong.

Outside of manufacturing, transportation, wholesale trade, and professional and high-tech firms reported moderate growth in sales. Heading forward, transportation and wholesale trade firms expected strong sales growth, while professional and high-tech firms anticipated a moderate sales increase in the next six months. All types of firms reported moderate growth in capital spending plans.

For more information about District economic conditions visit: www.KansasCityFed.org/Research/RegionalEconomy

For more information about Commercial Real Estate Conditions in Wichita, Kansas check out our Year-end 2017 Market Wrap Up