Federal Reserve Bank of Chicago

CHICAGO—The United States Federal Reserve Board just released another “Beige Book” analysis of economic conditions and the outside experts it surveyed said growth in the Chicago region increased in the run-up to the New Year, but most still considered the pace quite moderate. Those surveyed, however, “were more optimistic about 2014 than they were during the previous reporting period.”

The new report bolsters the general feeling among local Fed insiders and other business economists. As reported last week in GlobeSt.com, William Strauss, a senior economist at the Federal Reserve in Chicago, said the Blue Chip forecasters predicted a 2.8% growth rate in 2014. That would be “the fastest growth we’ve seen in four years.” And the Federal Open Market Committee is even more optimistic, currently predicting a growth rate between 2.8% and 3.2%.

To produce the “Beige Book” Fed economists conduct a series of informal talks with key business contacts, economists, market experts and others in each sphere of economic activity and publish the anecdotal results eight times a year.

“Growth in consumer and business spending picked up to a moderate pace,” the new report on Chicago noted. “Manufacturing production growth was solid, while construction activity increased modestly.” Furthermore, credit conditions were a bit looser and business spending, including growth in capital expenditures, picked up, with spending on structures like grocery stores, automobile dealerships, and expansions at auto supplier plants leading the way.

Perhaps most important, “the pace of hiring picked up, as did expectations of future hiring,” the researchers found. The diversity of the metro area’s economy should serve it well over the coming year. Many of the Fed’s contacts report growth in demand from industrial and professional sectors. “Several contacts also reported difficulty retaining skilled workers because of improving job and income prospects in the labor market.”

And like most recent Beige Book reports, the Fed noted a modest increase in construction and real estate activity. “Demand for residential construction continued to expand, with strong growth again in the multifamily sector” and “contacts expected that record low vacancy rates for apartments would continue to boost new multifamily construction over the coming year.” Vacancies declined and rents increased in other commercial properties and “contacts noted especially strong growth in high-end retail and investments in income generating properties.”