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Beige Book Reads Like Goldilocks

Economic activity expanded in recent weeks, but the pace doesn't appear to have been overly brisk.
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U.S. economic activity continued to expand, generally speaking, between late August and early October, the

Federal Reserve

said Thursday in its regional survey known as the beige book.

The report, published eight times a year, summarizes business activity in the Fed's 12 districts. Four districts reported that economic growth firmed, while a couple said activity cooled. Other reports generally characterized growth as moderate or mixed.

Consumer spending increased more quickly in a number of districts, although several reports continued to say that home-related and automobile sales were sluggish, particularly for domestic cars, SUVs and light trucks. However, some areas reported increased sales of foreign cars and fuel-efficient vehicles.

Tourism was strong, and activity in the service sector expanded in most districts. Most districts reported stronger growth in consumer spending. Solid back-to-school sales helped boost retail revenue in the Philadelphia, Atlanta and Minneapolis districts. Chicago said back-to-school sales were within expectations.

Manufacturing conditions held up well for the most part. Eight of the 12 districts indicated that factory output increased, but Chicago and Kansas City said the pace of expansion slowed.

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At the same time, commercial construction gained strength in most of the country. Reports on residential real estate, however, indicated widespread cooling in most districts. Most areas reported higher home inventories, and several said homebuilders and sellers continued to offer incentives to attract buyers.

Financial institutions again said residential mortgage lending had tapered off, but commercial lending picked up in several districts. Agricultural conditions generally improved.

Several districts said labor markets were tight, and some spoke of a shortage of skilled workers. Wage pressures were in check in some districts, but higher in others.

The Boston, Philadelphia, Richmond, Minneapolis and Dallas reports characterized labor markets as generally tight, particularly for skilled workers, while the remaining districts said job growth was steady to stronger. Half of the districts mentioned labor shortages, particularly for professional, scientific and other technical workers.

Though the majority of Fed districts characterized price pressures as contained, input costs rose in some areas and a few reports mentioned increased instances of businesses passing on costs to customers.

On Wednesday, the minutes from the Fed's Sept. 20 gathering showed that most central bank officials felt the nation's economic activity had been decelerating in recent months, giving them the confidence to leave rates unchanged for the second consecutive meeting.

The latest beige book was prepared at the Federal Reserve Bank of Richmond and was based on information collected before Oct. 2. The beige book summarizes comments from Fed contacts like businesses, economists and market experts, and it isn't meant to serve as a commentary on the views of policymakers.

However, the report does provide guidance for some of the issues the Fed will talk about later this month when it meets to discuss rates. Following a two-year tightening campaign, the Fed has kept its fed funds target at 5.25% since June.