The Beige Book offered its ubiquitous modest, moderate, mummified growth outlook but added a few points that provide The Fed more ammo for hiking rates.
The key higlights from the report:
- tight labor markets ‘widely noted’ amid modest growth
- U.S. employment, wages grew modestly since mid-april
- price pressures grew slightly in most districts
- contacts in several district ‘generally optimistic’
- consumer spending up modestly, manufacturing mixed
- construction, real estate grew, outlook remained positive
- loan demand up moderately except for Dallas district
- many Fed districts reported steady to good credit availability
- energy sector remained weak
- Chicago, Kansas city Fed districts saw slower growth pace
- Dallas Fed district grew ‘marginally,’ New York generally flat
Some of the key anecdotes from the regional feds:
- Consumer spending and tourism activity was up modestly in many Districts
- Boston: March closed sales of single-family homes increased year-over-year in all six New England states
- New York: Retailers report that inventories are on the high side, particularly for warm weather apparel
- Philadelphia: Auto dealers reported that light vehicle sales have slowed somewhat during the current period
- Cleveland: Only consumer spending segment reporting strong activity was restaurants
- Richmond: Natural gas extraction increased since the previous report, while coal production was unchanged
- Atlanta: Firms seeking employees for high-demand fields, such as information technology, healthcare, engineering, and construction continued to experience difficulty filling jobs
- Chicago: Contacts again reported an increase in the length of auto loans
- St. Louis: Even with a near-perfect year in the field, most row crop operations will struggle to break even unless a crop price rebound is sustained and significant
- Minneapolis: Number of active drilling rigs in the District continued to fall through mid-May, reaching its lowest level in more than 10 years
- Kansas City: Several retailers noted an increase in sales for lower-priced items and spring outdoor products, while luxury products sold poorly
- Dallas: Gulf Coast chemical producers said margins were higher compared with the first quarter
- San Francisco: Contacts reported that minimum wage increases pushed up wages for low-skilled workers in various service sectors, with diminishing ripple effects up the pay scale
The reaction was a further rise in July rate-hike odds (and easing of June and September).
Charts: Bloomberg
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