Beige Book Cites Even Worse Labor Shortages (But No Wage Increases), Some Tariff Costs Passed On To Consumers
Three months after the Fed “modestly” downgraded its outlook on the US economy from “modest to moderate” growth to “slight to modest pace”, and two months after Fed appeared to give its outlook a modest uptick saying that at the national level, economic activity expanded “modestly” from October through mid-November, in the just released January Beige Book, the Fed kept its economic assessment broadly unchanged, saying “economic activity generally continued to expand modestly in the final six weeks of 2019″ with the Dallas and Richmond Districts noting above-average growth, while Philadelphia, St. Louis, and Kansas City reported sub-par growth.
In welcome news for the economy, the primary driver behind US GDP, consumer spending grew at a modest to moderate pace, with a number of Districts noting some pickup from the prior reporting period. On balance, holiday sales were said to be solid – although Target may beg to differ – with several Districts noting the growing importance of online shopping.
Some more big picture details:
- Vehicle sales generally expanded moderately, though a handful of Districts reported flat sales.
- Tourism was mixed, with growth reported in the eastern seaboard Districts but activity little changed in the Midwest and West.
- Of note, manufacturing activity was essentially flat in most Districts, as in the previous report, while business in non-financial services was mixed but, on balance, growing modestly.
- Transportation activity was also mixed across Districts, with a majority reporting flat to weaker activity.
- Banks mostly characterized loan volume as steady to expanding moderately.
- Home sales trends varied widely across Districts but were flat overall, while residential rental markets strengthened.
- Some Districts pointed to low inventories as restraining home sales. New residential construction expanded modestly.
- Commercial real estate activity varied substantially across Districts. Agricultural conditions were little changed, as was activity in the energy sector.
- In many Districts, tariffs and trade uncertainty continued to weigh on some businesses.
- Expectations for the near-term outlook remained modestly favorable across the nation.
Still, even though the Fed said there was no material change from December, an analysis by IFR observed that the latest Beige Book depicted economic activity that was “more modest and less moderate” based on a word count analysis. In this way, Reuters analysts said that they viewed the latest Beige Book “as a deterioration from the last version on November 27, 2019.”