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Beige Book: Wage pressures modest, Manufacturing better than ISM suggested

September 7, 2016
Bottom Line: The Fed’s summary of regional reports to be used for the September 20th - 21st FOMC meeting note that most districts reported "a 'modest' or 'moderate' pace of growth", a slight upgrade in Fed-speak from most reporting 'modest'. Somewhat counter to the ISM report (49.4, suggesting slight contraction), this report suggested manufacturing activity was flat to slightly up in general with Chicago reporting moderate growth. They noted, though, that energy-related products and services weakened. Reports on real estate activity were positive for both commercial and residential sectors. Labor market conditions "remained tight" in most districts. Finally, the San Francisco Fed preparing the report with data through August 29th noted, "Wage growth ranged from flat to strong across the Districts, but most reported that wage pressures remained fairly modest".

Below is the summary from the Beige Book, the Federal Reserve's round-up of business conditions in its 12 banking districts, prepared for the June 14th - 15th FOMC meeting. We have highlighted what we believe are the key phrases and paragraphs

Reports from the twelve Federal Reserve Districts suggest that national economic activity continued to expand at a modest pace on balance during the reporting period of July through late August. Most Districts reported a “modest” or “moderate” pace of overall growth. However, Kansas City and New York reported no change in activity, and Philadelphia and Richmond noted that, while still expanding, activity slowed from the previous period. Contacts across the twelve Districts generally expect moderate economic growth in coming months. Overall consumer spending was little changed in most Districts, and auto sales declined somewhat but remained at high levels. Tourism activity was flat from the previous report but above year-earlier levels. Sales of nonfinancial services gained further momentum. Manufacturing activity rose slightly in most Districts. Activity in residential real estate markets grew at a moderate pace, but the pace of sales was constrained in a few Districts by shortages of available homes. Commercial real estate activity expanded further. Demand for business and consumer credit varied across Districts but appeared to expand at a moderate pace overall, with stable credit quality. Agricultural conditions were mixed, with price declines largely offsetting growing volumes. Overall demand for energy-related products and services weakened. Labor market conditions remained tight in most Districts, with moderate payroll growth noted in general. Upward wage pressures increased further and were moderate on balance, with more rapid gains reported for workers with selected specialized skill sets. Price increases remained slight overall.
Article by contingentmacro