General economic activity was upgraded again since nine Districts reported moderate growth in the current edition compared to seven Districts in the December edition of the Beige Book. Moreover, the outlook is positive in most Districts.
Retail spending had increased in three-quarters of the Districts while real estate markets continued to improve. The renaissance in the industrial sector is continuing; all but one District reported both growing sales and an optimistic outlook with respect to manufacturing. But what really caught our eye was that wages actually are starting to move up, albeit modestly. But changes happen at the margin. What is happening, in our view, is that the labor market is tightening which means that wages will drift higher according to the laws of supply and demand. Look, the unemployment rate has fallen all the way to 6.7% and it could well be sitting at 6% before the end of the year.
The Beige Book… now and then
On the economy
January15th: Reports from the twelve Federal Reserve Districts suggest economic activity continued to expand across most regions and sectors from late November through the end of the year. Nine Districts indicated the local economy was expanding at a moderate pace; among these, the Atlanta and Chicago Districts saw conditions improve compared with the previous reporting period. Boston and Philadelphia cited modest growth, while Kansas City reported the economy held steady in December. The economic outlook is positive in most Districts, with some reports citing expectations of “more of the same” and some expecting a pickup in growth.
December 4th: Reports from the twelve Federal Reserve Districts indicated that the economy continued to expand at a modest to moderate pace from early October through mid-November. Activity in the New York, Cleveland, Richmond, Atlanta, St. Louis, Minneapolis, and Dallas Districts grew at a moderate pace, while Philadelphia, Chicago, Kansas City, and San Francisco cited modest growth. Boston reported that economic activity continued to expand.
On the consumer
January 15th: Three-quarters of the Districts indicated that retail activity had increased since the last Beige Book report. Most Districts reported that retail spending was up, with activity described as modestly to moderately higher and holiday sales on plan or up a bit compared with 2012. District reports on commercial real estate contained much good news.
December 4th: Consumer spending increased in almost all Districts at a modest to moderate pace.
On housing
January15th: Real estate markets generally continued to improve, according to District reports. Most Districts reported increases in home sales in the closing months of 2013 compared with last year.
December 4th: Residential real estate activity improved in Boston, Philadelphia, Chicago, St. Louis, Minneapolis, and San Francisco, while remaining steady or softening in other Districts
On manufacturing
January 15th: Reports from the 12 Districts generally painted a picture of steady growth in manufacturing. All but one District reported both growing sales and an optimistic outlook. Employment was generally described as “steady” with few instances of rapid growth but very few reports of staff cuts or plant closings. Contacts in several Districts reported concerns about health care cost inflation. Capital spending was generally up and contacts anticipated further growth.
December 4th: Manufacturing activity expanded at a modest to moderate pace in most Districts during the reporting period.
On the labor market
January 15th: Two-thirds of Districts noted increases in hiring; the Richmond District cited “numerous reports of strong labor demand.
December 4th: Hiring showed a modest increase in the Philadelphia, Richmond, St. Louis, Minneapolis, and Dallas Districts, while hiring in the remaining Districts was largely unchanged.
On wages and consumer prices
January 15th: Almost half the Districts reported that prices were stable; most other Districts noted small increases in prices. Upward movements in wages were cited by 8 of the 12 Districts; the increases were described as small to moderate.
December 4th: Overall wage pressures remain contained across most Districts, with a modest increase reported in Boston, New York, and Dallas
SEB