4th District - Cleveland

Regional Federal Reserve Banks

Economic activity in the Fourth District increased slightly since the beginning of June. Factory output was largely stable, though auto production declined. Most commercial builders reported that business is expanding and backlogs are up. Demand for business loans grew, while lending to households was mixed. Energy production was stable to increasing.

On balance, employment levels were largely unchanged, and wage pressures were limited to energy producers. Reports of rising input prices, especially for metals and petroleum-based products, were widespread. View full report.

Manufacturing

Almost all of our contacts reported price increases for raw materials, especially metals and petroleum-based products. In response, three-fourths of them raised their product prices recently.

Real Estate

Home builders reported little change in market conditions--flat to declining sales and a slowdown in traffic. Further, builders are not expecting any upturn in the industry for the remainder of the year.… Accounts of price increases for concrete, shingles, metal products, and fuel were common; in contrast, lumber prices were stable to declining. Subcontractors are readily available at very competitive rates. Several general contractors reported employee layoffs during the past few weeks, and none is expected to increase wages during 2008.

Most commercial contractors said that business is expanding. Several mentioned that their companies have strong backlogs and a steady flow of inquiries. However, builders told us that they are concerned about rising input prices and their ability to maintain current margins and backlogs. Nevertheless, they do not foresee any dramatic downturn in business. Several contractors commented that although financing is available, lending standards are becoming tighter. Contract pricing remains stable outside of rising materials costs, especially for steel, concrete, and petroleum-based products. Workforce levels remain largely unchanged, and little wage pressure was reported.

Energy

Half of our respondents told us they expect to increase the number of capital projects in the upcoming months. Most producers reported that credit remains readily available.