• The upgrade to the manufacturing sector was in part due to the higher production of autos. This reflects indications that supply-chain problems that first emerged from the natural disasters in Japan in March and that persisted during the second quarter of 2011 have started to reverse in the third quarter. The improvement, however, was not all in autos as the Beige Book also noted “growth in commercial aviation and aerospace manufacturing” along with an increase in steel production.
• The Beige Book indicated that consumer spending was up slightly in September, which represented little change from the characterization in August. It was noted that auto sales increased in a majority of Districts likely in part due to supply-chain problems easing that resulted in “a greater availability of new vehicles.”
• Real estate and construction activity in all Districts were little changed from the previous report.
• Bank and finance were “reported to have weakened some since the last report.” Loan demand weakened, but a number of Districts saw an increase in mortgage financing.
• Agricultural conditions were slightly less favourable relative to a year ago although energy and mining activity continued to strengthen.
• The characterization of labour markets was that they were generally little changed. “Several Districts cited only limited and selective demand for new hires.”
• Wage pressures remained subdued although there were pressures in certain areas requiring specialized skills such as in information technology.

Today’s Beige Book report continues to portray a relatively somber picture of the U.S. economy. While there were indications of some reversal of temporary factors that had weighed on growth during the first half of the year, the resulting pace of activity remained modest. In this environment, the Fed is expected to be in little rush to start withdrawing stimulus from the system with fed funds expected to remain highly accommodative until 2013.

Information contained in this report has been prepared by the Economics Department of RBC Financial Group based on information obtained from sources considered to be reliable. While every effort has been made to ensure accuracy and completeness, RBC Financial Group makes no such representation or warranty, express or implied. This report is for information purposes only and does not constitute an offer to sell or a solicitation to buy securities.

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