Research >> Economics

Beige Book: Economic Activity expanded at a slight to modest pace


The U.S. economy expanded at a slight to modest pace since the prior report as business activity varied across the country. Reports from Districts representing states in the southern and western U.S. generally were more upbeat than Districts representing the Midwest and Great Plains. Household spending was solid on balance: nonauto retail sales increased modestly, while light vehicle sales were generally robust. Tourism and travel-related spending was up modestly. Housing market conditions changed little. On the business spending side, nonresidential construction increased at a slightly slower yet still modest pace, while leasing activity advanced at a slow but steady rate. Manufacturing activity continued to edge lower. Contacts in some Districts suggested that persistent trade tensions and slower global growth weighed on activity. The early impact of a recent auto strike was limited. Freight shipments stabilized after falling during the previous reporting period. Bankers in many Districts reported moderately rising loan volumes, while activity in nonfinancial services increased solidly. Agricultural conditions deteriorated further due to the ongoing impacts of adverse weather, weak commodity prices, and trade disruptions. Business contacts mostly expect the economic expansion to continue; however, many lowered their outlooks for growth in the coming 6 to 12 months.

Employment and Wages
On balance, employment rose slightly amid reports of persistent worker shortages. Labor market tightness across skill levels and occupations was widely cited as a factor restraining hiring. Districts often reported relatively stronger demand for workers in the professional services and information technology industries. By contrast, hiring in freight and manufacturing was weak. A number of Districts reported that manufacturers reduced their headcounts because orders were soft. However, some firms were more concerned about the longer-term availability of workers and subsequently chose to reduce hours rather than staff levels. Wages rose moderately in most Districts, with upward pressure noted for lower-skill workers in the retail and hospitality industries and for higher-skill professional and technical workers. A number of smaller firms reported difficulty matching pay offers from larger firms. Broadly, employers continued to use nonwage approaches such as bonuses and benefits to attract and retain talent.

Prices
Most Districts characterized the recent pace of price increases as modest. Both retailers and manufacturers noted rising input costs, often for items subject to new tariffs, but retailers had relatively more success passing through these cost increases to their customers. Despite a recent increase in fuel costs, some reports suggested that shipping rates remained lower than they were earlier this year because of excess capacity in the industry.

Highlights by Federal Reserve District

Boston
Signs of slowing have become more widespread in recent weeks, although software and IT services firms reported results that exceeded expectations and real estate markets have not weakened. Outlooks have softened; contacts attribute some of the softening to increased uncertainty, not poorer current results.

New York
Regional economic growth slowed to a subdued pace. Job creation remained sluggish, largely reflecting a shortage of available workers, as labor markets remained very tight and wage growth picked up. Prices continued to rise modestly. Service sector activity weakened noticeably, and real estate markets softened somewhat.

Philadelphia
On balance, business activity continued at a modest pace of growth during the current Beige Book period. Further labor market tightening caused "acute pressure," described as increased hiring difficulty, constrained growth, and higher wages. Still, wages grew moderately and prices rose modestly overall. Most firms expressed a positive outlook, with ongoing caution amid heightened uncertainty.

Cleveland
District activity was stable on balance. Professional and business services, auto sales, and home sales rose while residential construction and freight fell. Manufacturing activity stabilized after a couple periods of decline. Employment was stable overall, though there were some scattered reports of softening. Wages increased modestly because of tight labor markets. Selling prices rose modestly.

Richmond
The Fifth District economy continued to grow at a modest rate. Manufacturers saw declines in shipments and new orders; however, port and trucking activity rose. Retail, tourism, and nonfinancial service firms generally experienced slight to moderate growth. Residential and commercial real estate sales, leasing, and construction picked up, overall. Labor markets remained tight. Wages and prices rose moderately.

Atlanta
The economy expanded at a modest pace. Labor markets remained tight, and reports of wage pressures were more widespread among low-skilled positions. Nonlabor input costs rose for some contacts. Overall retail sales were mixed. Residential real estate activity improved, while nonresidential activity was stable. Manufacturing activity rebounded since the previous report.

Chicago
Economic activity increased slightly overall. Employment, consumer spending, business spending, and construction and real estate all increased slightly. Manufacturing production declined a bit. Wages and prices rose slightly and financial conditions improved modestly. The crop harvest got off to a slow start, as rains delayed fieldwork.

St. Louis
Economic conditions have improved slightly since the previous report. Contacts from multiple industries noted a heightened sense of economic uncertainty. Consumer spending activity ticked up. Local bankers reported growth in outstanding loan volumes. However, manufacturing activity contracted slightly, and row crop production levels are expected to be well below 2018 levels.

Minneapolis
Ninth District activity grew at a slight pace. Employment was flat. Labor demand remained healthy with some signs of softness. Manufacturing activity decreased slightly, with some contacts expecting a further slowdown in the final quarter of 2019. Consumer spending was mixed, but late-summer tourism was solid. Commercial construction and real estate increased, but residential was mixed. Oil drilling increased slightly.

Kansas City
Economic activity expanded slightly in late August and September. Consumer spending rose modestly, and sales in the transportation, professional and high-tech services, and wholesale trade sectors were solid. Real estate activity increased, but residential construction activity slowed. However, energy and manufacturing activity declined, and agricultural conditions remained weak.

Dallas
Economic activity continued to expand moderately. Energy activity declined, but growth remained solid in manufacturing and services. Home sales increased and loan demand accelerated. Selling prices were largely flat, as firms' ability to pass through cost increases remained limited. Hiring continued at a steady pace. Outlooks were mixed and uncertainty remained elevated.

San Francisco
Economic activity in the Twelfth District expanded at a modest pace. The labor market remained tight, and wage growth was moderate. Reports on price inflation were mixed. Sales of retail goods increased modestly, and consumer and business services activity expanded slightly. The pace of commerce in the manufacturing sector was little changed, and the agriculture sector slowed further. Activity in residential and commercial real estate markets was solid, and lending grew further.






Posted: October 16, 2019 Wednesday 02:00 PM




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