The overall summary is that; the economy continues to expand across most of the nation at a modest to moderate pace. Tight labor markets are reducing the rate of hiring and causing wages to rise. The housing market is strengthening. Policy uncertainties are negatively impacting business investment. The economy is expected to continue grow and in fact accelerate over the couple of years.
In this report, we summarize the key findings of the 32 page Beige book that is issued by the Federal Reserve into an 800 word summary.
Labor markets continued to tighten, with most districts citing shortages across a broadening range of occupations and regions. Despite supply constraints impeding the ability of firms to attract and retain qualified workers, most districts reported that employment continued to grow at a modest to moderate pace. On balance, pricing pressures were little changed with most districts reporting modest increases. Rapidly rising costs for lumber, steel, and other commodities pushed input costs higher for some manufacturers and the construction sector.
Most districts continued to report moderate growth in manufacturing activity and in most nonfinancial service sectors. Construction of new homes and nonresidential structures continued to grow at modest to moderate rates, as did sales of existing homes as nonresidential leasing picked up a bit. Lending volume trends tended to mirror and support the general activity of the economy. Agricultural conditions remained mixed with some regions negatively affected by unusually wet weather. Consumer spending remains relatively flat and auto sales were down year on year in most districts. Policy uncertainty continues to hold back business investment across both districts and industries. Uncertainty regarding healthcare reform is weighing on healthcare spending.
Figure 1 shows a map of the U.S highlighting the 12 districts. The shortened district summaries below were reproduced from the Federal Reserve Beige Book.
Boston- Overall, economic growth was modest. Housing markets were strong despite low inventories. Labor markets remained tight. Price pressures continued to be modest. The outlook remained positive, with a bit of added caution.
New York- Economic activity has plateaued. Labor markets remained tight, and wages for skilled workers have continued to grow moderately. Selling prices have increased at a modest pace. Housing markets have been steady, on balance, while commercial real estate markets have been mixed.
Philadelphia- Overall, economic activity continued to rise modestly. The pace of nonresidential construction and existing homes sales ticked up, while nonfinancial services slowed. On balance, employment, wages, and prices continued to grow modestly,
St. Louis- Economic activity has continued to increase at a modest pace. General optimistic outlook going forward. Reports from auto dealers, indicate slowing sales which are expected to continue.
Cleveland- Business activity generally expanded at a moderate pace. Labor markets tightened. Single-family home sales picked up. Motor vehicle production was down slightly, while orders for heavy equipment rose. Businesses reported increasing selling prices due to rising input costs.
Minneapolis- Economic activity grew modestly. The professional services, residential construction, manufacturing, energy, and mining sectors saw growth, while commercial and residential real estate activity declined slightly. Employment and wages both saw moderate growth.
Richmond- Economic activity expanded modestly across a wide array of industries, and firms continued to add workers to their payrolls. Labor shortages persisted in most areas, keeping upward pressure on wages, while hindering growth in some industries.
Kansas City- Economic activity increased moderately. Manufacturing and real estate activity expanded at a moderate pace, and energy activity continued to increase modestly. Consumer spending rose at a modest pace, with a strong outlook. Agricultural conditions remained generally weak due to continued low commodity prices.
Atlanta- Economic activity modestly improved. The labor market remained tight. An uptick in wage growth was reported for high-demand positions. Retail sales were soft, however, sales of trucks and large vehicles remained solid. Manufacturers noted increases in new orders and production.
Dallas- Economic activity grew moderately, and outlooks remained positive. Retail sales accelerated slightly, despite some softness in auto sales. The energy sector saw further improvement, partly supporting output growth in manufacturing. Home sales continued to trend upward. Nonfinancial services activity expanded and loan demand increased.
Chicago- Growth slowed to a modest pace. Employment, business spending, and manufacturing production grew at a moderate rate, while construction and real estate grew modestly and consumer spending decreased slightly. Prices rose modestly. Conditions were little changed in the financial and agricultural sectors.
San Francisco- Economic activity continued to expand at a moderate pace. Overall, price inflation was steady. The labor market tightened further, and wage pressures grew moderately. Sales of retail goods grew modestly, and growth in the consumer and business services sectors remained strong. Manufacturing activity picked up to a modest pace. Activity in the real estate sector remained strong. Lending activity grew moderately.
At Gerdau, we scrutinize the Federal Reserve Beige book report looking for information on how the economy is performing nationally and regionally and clues to possible policy changes going forward.