Highlights of the Beige Book
Trade tariffs seen to be contributing to higher input costs
A few districts noted some increase in inflation pressures
Most districts noted concern over trade
Trade concern caused some businesses to curb investment
All districts noted widespread input prices pressures
Construction mixed, home sales a bit softer
Spending grew at modest pace, manufacturing moderate
Labor market tight
Prepared by NY Fed with data before Sept 1
The comments on trade show more concern than Brainard earlier but the overall tone is still entirely positive and points to a Fed that will continue to tighten with a rising risk it will tighten beyond whatever they've decided neutral to be.
Here's the main summary:
Overall Economic Activity
Reports from the Federal Reserve Districts suggested that the economy expanded at a moderate pace through the end of August. Dallas reported relatively brisk growth, while Philadelphia, St. Louis, and Kansas City indicated somewhat below average growth. Consumer spending continued to grow at a modest pace since the last report, and tourism activity expanded, to varying degrees, across the nation. Manufacturing activity grew at a moderate rate in most Districts, though St. Louis described business as little changed and Richmond reported a decline in activity. Transportation activity expanded, with a few Districts characterizing growth as robust. Home construction activity was mixed but up modestly, on balance. However, home sales were somewhat softer, on balance-in some cases due to reduced demand, in others due more to low inventories. Commercial real estate construction was also mixed, while both sales and leasing activity expanded modestly. Lending activity grew throughout the nation. Some Districts noted weakness in agricultural conditions. Businesses generally remained optimistic about the near-term outlook, though most Districts noted concern and uncertainty about trade tensions-particularly though not only among manufacturers. A number of Districts noted that such concerns had prompted some businesses to scale back or postpone capital investment.
Employment and Wages
Labor markets continued to be characterized as tight throughout the country, with most Districts reporting widespread shortages. While construction workers, truck drivers, engineers, and other high-skill workers remained in short supply, a number of Districts also noted shortages of lower-skill workers at restaurants, retailers, and other types of firms. Employment grew modestly or moderately across most of the nation, though Dallas noted robust job growth, while three Districts reported little change that partly reflected a dearth of applicants. Six of the twelve Districts cited instances in which labor shortages were constraining sales or delaying projects. Wage growth was mostly characterized as modest or moderate, though a number of Districts cited steep wage hikes for construction workers. Some Districts indicated that businesses were increasingly using benefits-such as vacation time, flexible schedules, and bonuses- to attract and retain workers, as well as putting more resources into training.
Prices
Prices of final goods and services continued to rise at a modest to moderate pace in most Districts, though there were some signs of a deceleration. All Districts noted fairly widespread input price pressures, particularly for construction materials and freight transportation. Tariffs were reported to be contributing to rising input costs, mainly for manufacturers. Businesses' input costs have generally been rising more rapidly than selling prices, though there have been increased efforts to pass along cost hikes to customers. A few Districts noted some increase in inflation expectations.
