—Many Business Contacts ‘Lowered Their Outlooks for Growth’
WASHINGTON (MaceNews) – The Beige Book survey of economic conditions Wednesday was heavy on the use of “slightly,” “slowing, “subdued” and “stable,” reflecting the kind of growth depletion depicted in the unexpected decline in the morning’s report on retail sales.
The survey, to be reviewed at the next Federal Open Market Committee meeting at the end of the month, found few signs of vigor in the Midwest and Great Plains states and not much notable strength elsewhere either.
“Contacts in some Districts suggested that persistent trade tensions and slower global growth weighed on activity,” the Beige book, compiled by the Cleveland Fed, said. “Manufacturing activity continued to edge lower.”
Retail sales went backwards in September, the Census Bureau reported earlier, with a 0.3% decline instead of the same degree of gains that was anticipated by forecasters. The first decline since February was a hint of trouble for the most vital component of the U.S. economy, consumer spending. However the report prompted commentary suggesting the report was out of step with other indicators that showed no lag in the consumer sector.
The Beige Book summary and highlights from the 12 Fed districts follow, with boldface emphasis added:
Overall Economic Activity
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.