The Federal Reserve's "Beige Book" is a summary of economic conditions reported by businesses in informal surveys conducted by the 12 Federal Reserve Banks around the country (which are referenced by number and name of the headquarters city). Following are the opening paragraphs from the national and regional summaries, plus any construction- or real estate-related comments. Click on the links shown for the full Beige Book or regional report. If you are not yet receiving regional construction excerpts and want to, send an e-mail to listing the states for which you want regional excerpts. (Some states are split between two banks; both bank reports will be sent to those state lists.)

National Summary

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Prepared at the Federal Reserve Bank of Chicago based on information collected before February 24, 2003. This document summarizes comments received from businesses and other contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.

Reports from the 12 Federal Reserve Districts generally suggested that growth in economic activity remained subdued in January and February. Only a few Districts reported any notable changes from the last Beige Book. In particular, Richmond indicated that economic activity "grew modestly" and Kansas City noted "some signs of strengthening"; by contrast, New York said that the regional economy had "generally weakened." Many reports indicated that geopolitical and economic uncertainties were constraining consumer and business spending and tempering near-term expectations.

Consumer spending remained weak, on balance, with a few districts noting a little improvement and others indicating a slight deterioration. Business spending was very soft, with little change in capital spending or hiring plans. Nearly all districts indicated that real estate and construction activities were mixed, with strength on the residential side and weakness on the nonresidential side. Most districts still described manufacturing activity as weak or lackluster, although half of the reports noted at least some degree of improvement. Refinancing activity continued to drive growth in household loans, while business loan demand remained weak. Contacts in most districts expressed concern over rising energy and insurance costs, but noted that businesses had difficulty passing along much, if any, of the cost increases to their customers. The agricultural sector continued to be affected by poor weather in many districts. Mining and energy extraction activity picked up, but energy production was limited by supply problems and some shortages of skilled labor.

Construction and Real Estate

Nearly all districts indicated that real estate and construction activities remained mixed, with strength on the residential side and weakness on the nonresidential side. New and existing home sales remained strong in nearly all districts, with only Dallas reporting that activity was soft. Housing demand generally appeared to be strongest for low- and moderate-priced units. Demand for higher-priced homes remained softer, although Richmond and Chicago noted slight improvement in some areas. None of the districts reported a general improvement in commercial real estate markets, and three suggested slight deterioration. Most regions said that net new demand for office space remained very weak. Vacancy rates continued to rise somewhat, and downward pressure on rents persisted. Philadelphia and Richmond indicated that office-leasing activity picked up as existing tenants renegotiated with landlords for lower rents and/or concessions. Boston also reported an increase in leasing activity, largely due to consolidations. Cleveland noted that state and local fiscal difficulties were having an impact on public construction projects, and St. Louis reported that several announced hospital, church, and college projects have been delayed due to economic uncertainty. Most reports suggested that there were few, if any, expectations of a near-term improvement in commercial real estate and building activities. Cleveland, however, noted an increase in demand for architects' services, which contacts suggested could be a precursor to increased commercial building activity.

1st District--Boston

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The First District economy shows few signs of improvement. Retailers cite disappointing December results, although some gained in January and February. Most manufacturing contacts report weak demand. Commercial real estate markets in New England remain very slow. Most software and information technology providers say demand is declining. The outlook is highly uncertain and virtually no contacts are making plans based on expectations of an upturn.

Commercial Real Estate

Commercial real estate markets in New England remain sluggish. Respondents report little change in activity since our last contact in November, with any new leasing activity being spurred predominantly by consolidation rather than by expansion or growth. While demand for building purchases continues to be strong, lack of demand for rental space has led to lower rental rates and higher vacancy rates in office markets throughout the region. In the Boston area, the published vacancy rates are around 15% in the city and 30% in the suburbs, but substantially more space is actually available for rent, as some companies make deals for space that is not even listed for sublease. Rental rates for Class A space have dropped to what Class B or Class C buildings commanded two years ago. With little expectation that the economy will improve in the near future, contacts predict a third consecutive year of negative absorption.

Second District--New York

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The Second District's economy has generally softened since the last report, with the notable exception of housing, which appears to have regained some momentum. Signs of weakness are particularly evident in the labor market. While business contacts report increased cost pressures, mainly for insurance and energy, these pressures show no signs of feeding into finished-goods prices. The President's Day snowstorm had a large effect on the retail sector but little disruptive effect on manufacturing or shipping.

Retailers note that sales were below plan in recent weeks, particularly during and after the blizzard. Selling prices and merchandise costs were described as steady to lower than a year ago, while retail inventories were said to be in fairly good shape. Manufacturers indicate mixed but generally softer conditions in recent weeks; they also note increased upward cost pressures but flat to declining selling prices.

Home construction and the housing market generally have picked up since the last report, though the upper end of the market remains weak. Manhattan's office market has been stable to slightly weaker in early 2003, with rents continuing to fall. Conditions in New York City's financial industry have reportedly deteriorated since the last report. Finally, bankers report some weakening in consumer loan demand, a modest upturn in consumer delinquency rates, and tighter lending standards on commercial borrowers.

Construction and Real Estate

Residential real estate markets have shown signs of regaining steam since the last report, while commercial markets remain soft but stable. New York State realtors report that sales of single-family homes rebounded in December, while selling prices continued to run more than 10% ahead of a year earlier, with the steepest gains in the New York City area. Contacts report that sales of Manhattan co-ops and condos picked up in January and early February and that selling prices have been stable in recent months. The high end of the market, however, continues to lag.

Both single-family and multifamily housing permits in the district rebounded in December, after drifting down in the prior two months. More recently, homebuilders in northern New Jersey report that demand remains strong for homes selling for under $1 million, but note that demand has weakened further at the top end of the market, particularly in areas near New York City. An industry contact notes that labor and material costs are not a problem but that liability insurance coverage is increasingly difficult--builders are more concerned about availability than the rising cost.

Manhattan's commercial real estate market was steady to slightly weaker in January. Lower Manhattan's availability rate inched up, after improving slowly but steadily in the second half of 2002. However, rates held steady in Midtown and edged down in Midtown South. Still, asking rents throughout the city continued to decline; they have fallen by roughly 20% from their early-2001 peaks, and industry experts note that the decline in actual rents has been much steeper. On the supply side, there is a moderate amount of new office space currently under construction in Manhattan: roughly 3 million square feet is scheduled for completion this year and another nearly 4 million in 2004. Together, this represents slightly over 1% of the total stock, and all of this new space will be in Midtown.

3rd District--Philadelphia

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The pace of business activity in the Third District was virtually steady in February, as some sectors improved slightly and others slowed. Manufacturers reported a small increase in new orders for the month compared with January, but shipments were flat and order backlogs declined. Retail sales of general merchandise and auto sales eased in February from January and from February of last year. Bank lending has been rising slowly, with most of the growth coming from consumer loans, although some banks reported recent increases in business lending. Commercial real estate market conditions have shown little change. Vacancy rates have been nearly steady, but effective rents have edged down. Residential real estate sales have been steady at a fairly brisk pace, and builders' backlogs remain high.

Looking ahead, contacts in the Third District business community expect some improvement, although they do not foresee a strengthening in growth. Manufacturers forecast some increases in shipments and orders during the next six months, but their level of optimism has waned somewhat since the start of the year. Retailers anticipate a slow improvement in sales, but they are being very conservative in their sales plans for the spring. Auto dealers expect a pickup in sales as winter comes to an end, but they do not expect to match last year's sales rate. Bankers expect slight gains in lending, but they have become increasingly concerned that loan growth could stall if the pace of business activity in the region does not improve.

Real Estate and Construction

There has been little change in conditions in Third District commercial real estate markets in recent months. Surveys by area real estate firms indicated that overall vacancy rates have been nearly steady, with slight increases in some locations and slight decreases in others. The office vacancy rate in the Philadelphia central business district was recently estimated at around 13%. The vacancy rate in suburban areas varied. In markets where new buildings have been completed the rate was around 20%, but in other markets it was lower. Quoted rents remained fairly stable, but effective rental rates have fallen as landlords have raised tenant improvement allowances and offered rent-free periods. Leasing activity has picked up as many tenants have negotiated new or renewed leases to take advantage of landlord concessions. Although a number of new buildings have been proposed, contacts say construction activity has been easing and is likely to fall further until firms in the region add substantial numbers of new employees.

Residential real estate agents and homebuilders generally reported steady rates of sales in January and February at a fairly strong pace. Price appreciation continued to be strong in many parts of the region, although instances of multiple offers have diminished. Real estate agents expect sales of new and existing homes for the year as a whole to be a few percentage points below last year's level. Builders reported little or no decreases in backlogs, which have been kept up by strong sales while construction has been delayed by adverse weather. Residential construction contractors generally indicated that land prices continue to rise, but materials and labor costs have been mainly steady.

4th District--Cleveland

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Economic conditions in the Fourth District remained mixed in January and through the first three weeks of February. On balance, conditions in this report were very similar to the last: Conditions in residential construction were positive. Although trucking and shipping contacts reported a slight seasonal decline, conditions remained generally stable. Manufacturing, banking, and retail reports were mixed. Commercial construction conditions remained poor. Winter weather did have an adverse impact on several businesses in the region. Businesses in retail and construction saw less customer traffic than usual, and many firms across several industries temporarily closed operations because of severe winter weather during the survey period.

While hints of future improvement can be found in this report (for example, new orders in manufacturing increased slightly), little suggested conditions would change in the near future. In the current environment, contacts remained reluctant to forecast future economic conditions--most are basing future decisions on the expectation that conditions will remain flat over the next few months. A few firms reported reducing their capital expenditure plans since the first of the year, but most appear to have adopted a wait-and-see attitude before changing their budgets.

Labor market conditions have deteriorated since the last report--several manufacturers reported having reduced their labor forces or planning to do so. The few firms that were looking for employees reported no trouble in hiring--one contact reported 8,600 applications for 200 jobs at a new facility that would be opening in the near future.


District homebuilders reported that sales were steady, at levels slightly higher than at the start of 2002. Despite some slowing in consumer traffic (partially attributed to poor weather), demand remained reasonably strong in a favorable interest rate environment.

Commercial builders, on the other hand, continued to report weak conditions. Worsening state and local budget crises have had an impact on the availability of public construction projects (a major source of business for some firms in 2002). Competition for available projects in all areas of commercial construction has increased. Some contacts noted, however, that architects have been seeing an increase in business, suggesting a pickup will occur in commercial construction in about a year.

5th District--Richmond

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Economic activity in the Fifth District grew modestly in January and the first three weeks of February, with a slight improvement in services and manufacturing conditions offsetting a listless retail sector. Services businesses reported generally steady to slightly higher demand, and some contacts cited higher orders for coming months. District manufacturing activity expanded somewhat faster, as shipments and new orders rose sharply in January and early February. In contrast, retail sales were little changed from our previous report, and retailers continued to trim payrolls. Price inflation remained modest according to contacts. In the real estate sector, District home sales rose at a solid rate, but commercial leasing activity slowed as war prospects unsettled potential lessees. In agriculture, unusually cold and snowy weather hampered field preparation and led to the abandonment of still-unharvested crops in some areas of the District.

Real Estate

Residential realtors generally reported that home sales were solid in January and February. An agent in Greenville, SC, said local sales were the best he had seen in 40 years. He commented that sales were so good he was afraid to say too much "for fear of jinxing them." A realtor in Odenton, MD, also reported strong sales in January, adding that properties put on the market in her area did not last long. In Richmond, VA, an agent said that the remarkable string of monthly sales advances in that area remained intact. In a less rosy assessment, real estate agents in the District of Columbia said sales had been somewhat slower in recent weeks--in part because of inclement weather in the region. Across the district, homes in the low-to-middle price range were selling best, but a few realtors said that interest in higher price homes was picking up. Home prices were reported to be rising modestly in most locations.

Commercial realtors reported slower growth in leasing activity in recent weeks as potential lessees in the office sector adopted a "wait and see" attitude in light of political developments internationally. A realtor in Raleigh, NC, captured the mood of many with the observation that "people are just waiting on the sidelines." The leasing of retail space picked up--a realtor in Richmond, VA, for example, experienced "very high" growth over the past six weeks in retail leasing. But office and industrial space leasing was sluggish. Vacancy rates for retail space remained low, while office vacancy rates edged higher. Rents for retail space held firm, but edged lower for office space. Realtors in Washington, DC, and Charlotte, NC, noted that some tenants had recently renegotiated their leases, obtaining lower rents and other concessions. New commercial construction was generally flat across sectors--several realtors in the Carolinas reported a shift to refurbishing older buildings in lieu of building new ones.

6th District--Atlanta

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Contacts reported that economic activity in the Sixth District remained lackluster in January and February. Retail sales were sluggish, while manufacturers noted continued weakness outside of defense and auto-related production. The district's tourist sector continued its gradual improvement. Labor markets displayed a modest improvement in January and February; employers reportedly remained reluctant to add permanent staff but increased their use of overtime and part-time workers. The district's single-family housing market remained strong, but commercial real estate markets continued to suffer from low demand for space. Most contacts indicated that geopolitical concerns and higher fuel prices were weighing on near-term expectations for the District's economy.

Real Estate and Construction

Low mortgage rates continued to propel district housing markets in January and February. The strongest reports in the district were from Florida, while contacts reported that home sales and construction elsewhere were mostly stable. High-end homes remained difficult to sell in most parts of the region. Reports noted that commercial real estate markets remained weak in January and February. Vacancy rates increased in some metropolitan markets, and new construction was largely limited to public works projects. Several contacts noted that generous lease incentives were prevalent, but absorption remained at low levels.

7th District--Chicago

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Reports from Seventh District contacts generally suggested that economic activity remained soft in January and February. Consumer spending was again relatively weak, and caution persisted in businesses' capital spending and hiring plans. Strength continued in sales of both new and existing homes, while nonresidential building and real estate activities were again soft. Manufacturing activity remained generally weak but appeared to have improved further from our last report. Bankers continued to report strong mortgage demand from households and weak loan demand from businesses. There were a few new reports of input cost increases, particularly for energy, but prices at the retail level remained largely in check. District farmland values in 2002 posted the largest year-over-year gain since 1997, even as concerns increased about the impact of drought and continued low dairy prices.

Construction and Real Estate

Construction and real estate activity was again strong on the residential side and soft on the nonresidential side. Sales of both new and existing homes remained strong, according to homebuilders and realtors. Demand for lower priced homes was strongest in most markets, although there were a few reports of improving demand for higher priced new homes in some. One builders association in Wisconsin noted record attendance at their annual home show in January, with builders and remodelers optimistic about the "quality of leads" from the show. Apartment occupancy rates continued to trend down, despite little new development of multifamily rental units. Nonresidential activity remained weak. Office vacancy rates crept up in some markets, in part because of lease termination agreements. While these deals increased official vacancy rates, they also reduced the amount of sublease and "shadow" space on the market. One contact said of office leasing activity, "As for net new demand, we're just not seeing it." Some reports suggested that vacancies rose in some older retail developments and that the number of new retail projects in the pipeline was slowing.

8th District-St. Louis

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Contacts in the Eighth District reported lackluster business conditions in recent months, with little change from the last survey. In manufacturing, reports of weak sales, consolidations, closings and cutbacks have continued. Retail sales during December and January were mostly flat from a year ago but met expectations. Auto sales over the same period declined. Residential real estate markets are still strong, while commercial real estate markets remain weak. Over the past three months, there was essentially no change in lending activity.

Real Estate and Construction

Residential real estate sales are still up in most of the district. Last year was a record year for home sales in Memphis, with an increase in total home sales of 20% in December 2002 compared with December 2001. In Arkansas, home sales were very strong the last two to three months of 2002 but slowed as the weather turned colder. Residential construction is also up in most district areas. In Louisville, contacts noted that housing starts are booming for homebuyers in the $100,000 to $150,000 range. Contacts in Fayetteville reported that housing starts continue to flourish. In the Greater St. Louis area, year-to-date single-family housing permits as of December 2002 were up 4 percent from 2001.

Commercial real estate markets are still slow in most of the district. St. Louis continues to experience an increase in office vacancy rates. Contacts in both Louisville and Fayetteville reported increased office vacancy rates at the end of 2002. Commercial construction is weak in most district areas. In northeast Arkansas, activity has continued to be slow and is not expected to pick up in the spring. In Memphis, contacts reported that there is virtually no building. In central Kentucky, construction of hospitals, churches, and college facilities are under way or have just been completed, but several that have been announced are being delayed because of uncertainty about the economy.

Banking and Finance

Credit standards for commercial real estate loans were tightened somewhat even though demand remained about the same. Both the credit standards and the demand for residential mortgage loans were reported to be generally unchanged.

9th District--Minneapolis

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Ninth District economic activity was mixed from early January through late February. Agriculture, home building, and mining grew. Manufacturing, tourism, and energy were mixed. Consumer spending was flat and commercial construction was down. Over this period, labor markets loosened slightly. Overall wage and price increases were modest. Significant price increases were noted in heating costs, gasoline, and tuition.

Construction and Real Estate

Commercial building was generally down. In 2003, only about 200,000 square feet of new space is planned in the Minneapolis-St. Paul area, down from 1.2 million square feet in 2002, according to a commercial real estate firm. A Minneapolis firm that reconfigures office space and moves furniture reported less work in January and February than in the last months of 2002. However, in Sioux Falls, SD, building permits were up in January compared with a year ago; commercial realtors, developers, and architects are expecting a good year in 2003, according to a city official.

Home building and residential real estate activity were solid. The number of housing units authorized in the Minneapolis-St. Paul area increased 14% in January compared with a year earlier. "Every indication is that 2003 should be another very busy year for builders," said a representative of a Minneapolis-St. Paul area builders association. However, the vacancy rate for apartments in Minneapolis-St. Paul increased to 6.6% in the fourth quarter of 2002, up from 4% a year earlier. A representative of a realtors association in La Crosse, WI, expects 2003 to be another good year for single-family home sales, but says 2003 will likely fall short of the 2002 sales record.

10th District-Kansas City

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The Tenth District economy showed some signs of strengthening in late January and February, despite widespread uncertainty among businesses and consumers. Retail sales posted slight gains, manufacturing activity improved, and energy activity picked up. In addition, residential real estate activity continued at a strong pace. On the negative side, auto sales were weak and commercial real estate remained in a slump. In the farm economy, many ranchers and farmers continued to suffer from the effects of drought. Wage and price pressures remained largely subdued across the district.

Real Estate and Construction

Residential real estate activity in the district remained strong in late January and February, although commercial real estate activity weakened further. Single-family housing starts throughout much of the district rose from already high levels. Most of this strengthening continued to be for lower priced homes, but there were also reports of increased construction of midrange homes in some areas. High-end home building, on the other hand, largely remained in a slump. Most builders expect home construction to remain solid in coming months, although builders in some drought-stricken areas were concerned about the effects of new water restrictions on permit applications. Home sales across the district were also solid, though reports were not as uniformly strong for housing starts. In the months ahead, most realtors expect sales to continue at the recent pace. Mortgage demand remained strong throughout much of the district, as refinancing activity continued at high levels. Nearly all recent refinancings have been used to reduce monthly payments-a contrast from previous surveys, when a sizable portion of refinancing activity was for the purpose of taking out cash. Lenders generally expect mortgage demand to stay solid and to possibly increase further in the spring. Commercial real estate activity remained weak across the district, with some markets experiencing even further deterioration. Office vacancy rates rose again in Denver, and commercial construction activity fell in nearly all markets. Absorption and prices of office space were down slightly in most areas, and many landlords were offering rent concessions to keep or attract tenants. Commercial realtors generally do not expect a turnaround in activity any time soon.


Prices for construction materials were basically flat, but some builders expect lumber and gypsum wallboard prices to increase in coming months.

11th District--Dallas

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From early January through mid-February, overall Eleventh District economic activity exhibited signs of inertia. Manufacturing activity remained lackluster. Service sector activity was mixed, with signs of a pickup in some industries and severe financial problems in others. Retail sales remain weak, and there is still little change in the financial services industry. Construction and real estate markets continued to decline. Energy activity picked up only mildly, despite a sharp increase in prices. Overall agricultural conditions were good.

Geopolitical uncertainties still dampen consumer and business confidence. High energy prices also weigh heavily on the outlook for some industries. Hiring is minimal, according to contacts that say investments are on hold until questions surrounding the war are resolved. Contacts report that concerns about terrorism seem to be distracting attention from normal business.


Demand for construction-related materials is waning. Metals producers reported some increases in selling prices, partially passing along rising costs for scrap metal and reinforcing steel. Producers of stone, clay, and glass were surprised by better-than-expected demand over the past two months, but expressed increased uncertainty about the outlook. Paper and lumber producers report soft sales during the same period, partly because of import competition. Demand for...PVC...has been very strong to supply the housing market and Asia.

Construction and Real Estate

Construction and real estate conditions continued to decline. Commercial markets are weak. Building acquisitions continue, but leasing activity is very soft, and rents are falling. Office landlords are offering numerous incentives to keep tenants and to get them to take more space. Vacancies are rising, and one contact noted that owners are obtaining reappraisals when vacancies occur, reducing their tax liability. Single-family activity remains soft, with numerous foreclosures, particularly in the Dallas-Fort Worth area. Although activity is still moderately strong in the market's low end, several contacts mentioned a lack of "urgency" among buyers. Builders report an increase in incentives and downward pressure on home prices.

12th District-San Francisco

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Reports from Twelfth District contacts indicate continued sluggish economic growth in much of the region during January and early February. While prices remained stable for most consumer goods and services, prices for energy and health care increased substantially. In labor markets, firms faced limited upward pressure on wages and salaries but noted continued rapid increases in costs for employee benefits. Many respondents pointed to uncertainties, due in part to geopolitical risks, as having negatively affected both consumer and business spending. Consumers appeared more cautious concerning expenditures on vehicles and travel. Conditions in district manufacturing generally remained weak with limited signs of improvement. The agricultural sector benefited from improved exports and oil and natural gas producers operated at high levels of capacity. Contacts reported continued strength in residential real estate, while commercial real estate remained weak. Bank lending continued recent patterns of rapid growth in residential mortgage loans and weak demand for business credit.

Real Estate and Construction

Overall conditions in district real estate remained mixed, with commercial real estate markets still in a serious slump and residential markets still showing strength in recent weeks. Commercial office vacancy rates remained high and continued to edge up as leases expired. Rental rates fell, most notably in the San Francisco Bay Area, and new office construction is not expected to pick up for some time.

In contrast, contacts indicated that residential housing markets across much of the district remained robust in January and early February. Sales of low-to-median priced homes remained high in most of the district, especially in Southern California and Hawaii, although the pace of sales and of price appreciation has moderated in some areas. Throughout the district, contacts noted that markets for high-end homes had cooled off. Respondents attributed continued strength in overall home sales primarily to low mortgage interest rates.

Kenneth D. Simonson is chief economist for the Associated General Contractors of America, 333 John Carlyle Street, Suite 200, Alexandria, VA 22314, 703-837-5313; fax -5406; e-mail; website