Research >> Economics

Beige Book: Economic Activity continues to expand at a modest to moderate rate


Economic activity expanded at a modest to moderate rate over the past several weeks, according to the majority of Federal Reserve Districts. The St. Louis and Kansas City Districts, however, reported no change during this period. Consumer spending generally picked up, but growth was uneven across the nation, including mixed reports of auto sales. Overall, growth in tourism was flat to modest. There were indications that the coronavirus was negatively impacting travel and tourism in the U.S. Manufacturing activity expanded in most parts of the country; however, some supply chain delays were reported as a result of the coronavirus and several Districts said that producers feared further disruptions in the coming weeks. Transportation activity was generally flat to up slightly aside from some Mid-Atlantic ports that saw strong volume growth. U.S. nonfinancial services firms generally experienced mild to moderate growth. Overall loan growth was flat to up modestly, according to most Districts; notable exceptions were St. Louis, New York, and Kansas City, where declines were reported. On the whole, residential home sales picked up modestly. Nonresidential real estate sales and leasing activity varied across Districts. Agricultural conditions were little changed in recent weeks while some declines in natural resource extraction were reported. Outlooks for the near-term were mostly for modest growth with the coronavirus and the upcoming presidential election cited as potential risks.

Employment and Wages
Employment increased at a slight to moderate pace, overall, with hiring constrained by a tight labor market. Insufficient labor lowered growth for many firms and led to delays in construction projects. Several employers changed from temporary to permanent workers in order to attract talent, and firms made efforts to retain workers such as keeping seasonal workers on staff in the off-season. While employment grew across most sectors, manufacturers, retailers, and transportation companies reported lower demand for labor in some Districts. Wages grew at a modest to moderate rate in most Districts, similar to last period, and contacts expected wage growth to continue in this range. Firms reported that the tight labor market and minimum wage increases were putting upward pressure on wages. Companies also spent more on benefits, as the cost of benefits rose and as employers expanded benefits to attract and retain workers.

Prices
Most Districts reported modest growth in selling prices, as well as in nonlabor input prices. Some firms, particularly manufacturers, were optimistic that the Phase One trade deal with China would reduce goods prices, but some still struggled with tariffs and were concerned about how the coronavirus might affect prices. Oil and gas prices decreased across the country, which was largely attributed to weak demand from China because of the coronavirus. Retail prices were up in much of the country although some retailers had lower costs due to improved trade conditions. Meanwhile, agriculture price changes varied.

Highlights by Federal Reserve District
Boston
The regional economy continued expanding in early 2020. A majority of manufacturers and retailers reported revenue increases from a year earlier. Staffing firms also reported revenue growth; some said growth was slower than in recent past periods and some said it was faster than expected. Business contacts continued to mention tight labor markets but little wage pressure. Prices stayed flat to up slightly. Outlooks remained positive.

New York
Growth in the regional economy picked up to a moderate pace. With tight labor markets, wage growth picked up but job creation remained sluggish. Both input prices and selling prices rose moderately. Housing markets firmed, while commercial real estate markets weakened further. Business contacts have grown somewhat more optimistic about the near-term outlook.

Philadelphia
On balance, business activity resumed a modest pace of growth during the current Beige Book period after a lull last period. Tight labor markets continued to constrain employment growth to slight increases, but wage pressures ebbed to a modest pace. Price increases remained modest, and firms optimistic, but the coronavirus has increased uncertainty about future growth.

Cleveland
Economic activity in the Fourth District increased modestly thanks to growth in retail and professional and business services. Manufacturing demand held steady, but firms noted weaker demand because of the Boeing 737 Max production halt and concern about COVID-19's impact on supply chains. Home and auto demand increased. Employment and wages rose modestly overall. Inflation pressures remained modest.

Richmond
The Fifth District economy grew moderately in recent weeks. Manufacturing activity picked up, as did port volumes and retail sales; however, some concerns were expressed about the coronavirus lowering imports of inputs and retail goods from China in coming months. Also, employment increased and wages continued to rise. Price growth for inputs and selling prices, on the other hand, slowed to a modest rate.

Atlanta
Economic activity grew modestly. The labor market remained tight and wages were steady, on balance. Nonlabor costs continued to rise. The pace of retail and auto sales growth was flat. Home prices were steady, and commercial real estate activity continued to grow. Manufacturing declined, as new orders and production levels fell. Banking activity was stable.

Chicago
Economic activity increased modestly. Consumer spending and employment increased modestly, while construction and real estate activity increased slightly. Business spending and manufacturing were little changed. Wages increased modestly, prices increased slightly, and financial conditions were unchanged. Farmers' income prospects deteriorated some. The coronavirus outbreak has had little effect to date.

St. Louis
Reports from contacts indicate that overall economic conditions have been mixed but are generally unchanged since our previous report. Overall inflation pressures increased slightly, although there were some signs of further softening. Reports from manufacturing contacts indicate somewhat of a rebound in activity after consecutive reports of slowing growth.

Minneapolis
Ninth District economic activity grew at a moderate pace. Employment and wages increased moderately. Following a slowdown in 2019, manufacturing activity appears to have increased recently. Favorable snow conditions across much of the District boosted winter tourism, with some exceptions. Commercial and residential construction and real estate increased. Agricultural conditions were stable at low levels.

Kansas City
The District economy was largely unchanged in January and February, but activity levels were above year-ago levels in most sectors. Consumer spending slowed slightly and construction activity held steady, while manufacturing activity edged up in February for the first time since last summer. Energy activity continued to decline due primarily to low oil and natural gas prices, while the agriculture sector remained weak.

Dallas
Economic activity expanded moderately, with broad-based growth seen in services (excluding retail) and manufacturing but declining activity in the energy sector. Housing demand continued to rise broadly. Employment growth slowed to a modest pace. Input prices continued to rise while selling prices were mixed. Outlooks generally improved, though the coronavirus introduced new uncertainty into the business environment.

San Francisco
Economic activity in the Twelfth District expanded at a modest pace. Employment increased some and wages rose further. Price inflation was stable. Sales of retail goods increased markedly, and consumer and business services activity was up somewhat. The manufacturing sector contracted minutely on net, but activity in the agriculture sector increased slightly. The residential real estate market expanded modestly, while commercial real estate activity was mixed. Lending grew further.




Posted: March 4, 2020 Wednesday 02:00 PM




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