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Beige Book: Modest or moderate growth for all US districts

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WASHINGTON (1/17/13)--Economic activity has expanded in all 12 U.S. financial districts at either a modest or moderate growth pace, according to the Federal Reserve's Beige Book released Wednesday.

All 12 districts reported some growth in consumer spending, with inflation mostly unchanged.

Trends in wages, prices, and employment conditions stayed relatively unchanged in all districts. Input price pressures were reported to be steady overall, with mixed reports for specific commodity prices in several districts. Employment conditions also were little changed since the last report.

However, hiring plans were more cautious for firms doing business in Europe or in the defense sector. Wage pressures were stable in all 12 districts, though several districts cited greater pressures for firms that reported difficulties finding qualified workers with specific skills.

Manufacturing activity was mixed, with six districts growing since the last Beige Book, three contracting, and two reporting little or no change.

Existing residential real estate activity expanded in all reporting districts. Growth rates were described as moderate or strong in nine districts. The Boston District attributed its strong sales growth to low interest rates, affordable prices and rising rents. All districts reporting on price levels saw increases, with New York and Chicago reporting only very minor increases. Five districts reported housing inventories are falling.

New residential construction--including repairs--expanded in all but one district reporting. The Kansas City District reported that increased lumber and drywall costs limited construction, causing a slight decline this period. Hurricane Sandy disrupted construction activity initially in New York, but that has since led to increased work for subcontractors on repairs and reconstruction.

Labor market conditions remained mostly unchanged in all districts. The Boston, Richmond, Atlanta, Chicago, Kansas City and San Francisco districts reported delayed hiring, often in defense manufacturing, due to fiscal cliff uncertainties.

Companies in the Chicago District with trade or investment exposures to Europe reduced their hiring plans. Manufacturers there choose to cut hours instead of reducing work forces in expectation of production rebounds in 2013. Atlanta and Kansas City cited health-care policy changes and costs as another cause for minimal hiring. The New York, Atlanta, Minneapolis and Dallas districts saw the labor market firming modestly. Several districts reported difficulties finding qualified workers in some fields.

Market News (01/17/2013)

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MADISON, Wis. (1/17/13)

  • Homebuilder confidence in the U.S. during January remained at the highest level in more than six years, according to the National Association of Homebuilders/Wells Fargo Index of Builder Confidence. The latest figure adds toevidence that the residential real estate market will help boost an economic expansion (, Moody's Jan. 16). The index was at 47 this month--matching December as the highest reading since April 2006. Low borrowing costs and stronger sales are elevating traffic for lenders. Also, rising household formation and property values may continue to bring residential real estate sales and prices back to pre-recession levels, Bloomberg said. Although housing industry fundamentals continue to improve, hardships in obtaining accurate home appraisals, political squabbling over economic concerns, and ongoing stringent mortgage credit conditions still are obstacles to a housing recovery, NAHB Chief Economist David Crowe said …
  • Mortgage applications in the U.S. jumped 15.2% for the week ended Jan. 11 from one week earlier, according to the Market Composite Index released Wednesday by the Mortgage Bankers Association (MBA). The index is part of the MBA Weekly Mortgage Applications Survey. On an unadjusted basis, the index surged 45%. The Refinance Index increased 15%, while the refinance share of mortgage activity remained unchanged at 82% of total applications from the previous week. The seasonally adjusted Purchase Index rose 13% to the highest level since April 2011. The unadjusted Purchase Index spiked 47% and was 5% higher than the same week one year ago. The adjustable-rate mortgage share of activity increased to 3% of total applications. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) remained unchanged at 3.61%, with points decreasing to 0.38 from 0.41 (including the origination fee) for 80% loan-to-value ratio loans. For the MBA report, use the link …

News of the Competition (01/17/2013)

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MADISON, Wis. (1/17/13)

  • More U.S. banks are viewing branch closures as a way to cut their costs (American Banker Jan. 15). Several bigger banks are selling off small branches judged to be too costly to operate. As an example, Bank of America is selling dozens of its branches to community banks, including Fayetteville, Ark.-based Arvest Bank, the Banker said. Keeping smaller branches operating is hard for many banks to justify, Jeff Marsico, executive vice president at consulting firm Kafafian Group, told the Banker. The typical U.S. bank branch produces yearly revenue about equal to 2% of its deposits, with the average annual cost being $500,000 to $600,000 to run a branch, he added. The annual expenses to run a bank with $10 billion in deposits could be triple the revenue needed, Marsico told the Banker. Consequently, many banks have decided to close money-losing branches than try to make them viable, Jamie Eads, an analyst at bank consultancy Bancography, told the publication …
  • JPMorgan Chase Wednesday released two of its internal London Whale Reports on mistakes that resulted in at least $6.2 billion trading loss. The bank said CEO Jamie Dimon would be hit with a 50% pay cut for 2012 because the failure was his "ultimate responsibility" (The Wall Street Journal Jan. 16). Dimon's 2012 salary and compensation were downgraded to $11.5 million from $23.1 million the prior year, according to a JPMorgan Chase filing made public Wednesday, the Journal said ...