Beige Book Shows Slight-to-Moderate Growth: Words of the Day "Shutdown, Weather"
The Federal Reserve "Beige Book" is a compilation of economic activity produced by each of the Fed's 12 districts.
Despite the impressive-sounding name, there is typically not much in it that has not been reported elsewhere, earlier, either in the regional Fed reports from each district (e.g. Empire State Report, Philly Fed Report, Dallas Fed Report, etc.) or FOMC discussion minutes.
The book does provide an overall compilation and synopsis in one place.
Overall Economic Activity
Economic activity continued to expand in late January and February, with ten Districts reporting slight-to-moderate growth, and Philadelphia and St. Louis reporting flat economic conditions. About half of the Districts noted that the government shutdown had led to slower economic activity in some sectors including retail, auto sales, tourism, real estate, restaurants, manufacturing, and staffing services. Consumer spending activity was mixed across the country, with contacts from several Districts attributing lower retail and auto sales to harsh winter weather and to higher costs of credit. Manufacturing activity strengthened on balance, but numerous manufacturing contacts conveyed concerns about weakening global demand, higher costs due to tariffs, and ongoing trade policy uncertainty. Activity in the nonfinancial services sector increased at a modest-to-moderate pace in most Districts, driven in part by growth in the professional, scientific, and technical services sub-sector. Residential construction activity was steady or slightly higher across most of the U.S., but residential home sales were generally lower. Several real estate contacts noted that inventories had risen slightly but remained historically low, while home prices continued to appreciate but at a slightly slower pace. Agricultural conditions remained weak, and energy activity was mixed across Districts.
Employment and Wages
Employment increased in most Districts, with modest-to-moderate gains in a majority of Districts and steady to slightly higher employment in the rest. Labor markets remained tight for all skill levels, including notable worker shortages for positions relating to information technology, manufacturing, trucking, restaurants, and construction. Contacts reported labor shortages were restricting employment growth in some areas. Contacts in the higher education sector from the St. Louis District indicated falling enrollment as potential students were increasingly choosing to enter the labor market. Wages continued to increase for both low- and high-skilled positions across the nation, and a majority of Districts reported moderately higher wages. In addition, contacts in about half of the Districts noted rising non-wage forms of employee compensation, including bonuses, relocation assistance, vacation time, and flexible work arrangements.
Prices continued to increase at a modest-to-moderate pace, with several Districts noting faster growth for input prices than selling prices. The ability to pass on higher input costs to consumers varied by region and industry, and a few Districts noted that demand and the level of industry competition played a role in this variance. A few Districts continued to report upward price pressures from tariffs on certain goods and services. However, several Districts noted that the price of steel, which has been impacted by tariffs, had stabilized or fallen recently. In addition, energy costs, including fuel, declined in some areas. Agriculture commodity prices were mixed, though soybeans and dairy prices were notably weak.
Word of the Day Synopsis
The full report is 32 pages of mostly drivel.
A search for the word "tariff" came up 18 times. "Uncertain" came up 17 times.
The word of the day is "shutdown". It came up 22 times.
Here's a typical comment: "The partial government shutdown reportedly created uncertainty among client organizations, who were less willing to make hiring decisions near the end of 2018."
"Weather" was a close runner-up. It came up 21 times. Here's a typical comment: "Freight contacts reported demand was flat because of extreme weather in the Midwest and Northeast."
The most pertinent comment regards pricing. Several districts note that manufacturers were unable to pass on input price hikes.
Mike "Mish" Shedlock