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NAM: Fed’s Beige Book: US economy still expanding, higher wages in most regions

On Wednesday, the Federal Reserve released its most recent beige book. Reuters  says the report gave cause for caution and optimism in the US economic outlook, with consumer spending increasing only modestly in most districts; capital spending increasing overall but only scattered reports of spending for capacity expansion; and manufacturing increasing in most districts but mixed expectations for future growth. Meanwhile, the Wall Street Journal states the beige book highlighted tightening labor markets and increasing wage pressures. The Journal reports that modest increases in retail prices in most districts are a sign that inflation pressures may be firming.

The AP reports the Fed “said Wednesday that the economy kept expanding in late February and March, despite weakness in the energy sector and a slowdown in exports of some factory and farm products because of global weakness and the strong dollar.” The survey “found that consumer spending was rising modestly and wages were increasing in all districts except Atlanta.” “The strongest wage gains were in occupations experiencing labor shortages,” with the Boston, Cleveland, and St. Louis districts reporting “sizable” wage gains for employees in the areas of “information technology, skilled construction jobs and some manufacturing trades”; however, “districts with heavy concentrations of energy industries reported layoffs due to cutbacks in exploration and production.” Residential housing construction expanded in most districts, “with several districts crediting a mild winter for boosting home sales.”

USA Today reports that “consumer spending, which makes up 70% of economic activity, appeared to slow.” However, “there were two possible bright spots: Sluggish wage growth appears to be picking up and business spending ‘generally expanded across most districts.’” In addition, “Capital outlays had been lackluster amid the manufacturing and energy downturn.” Overall, most regions saw pickup in manufacturing, with moderate growth in Chicago and Richmond and modest gains in San Francisco, St. Louis, and Philadelphia. Kansas City and Cleveland, however, saw manufacturing activity decline. “Oil and gas suppliers are still hurting amid weak demand,” but “healthy gains were reported by Midwest automakers and aerospace producers, computer and electronics firms in Boston and Dallas, and construction materials factories in Philadelphia, Cleveland and Chicago.”

MarketWatch also reports on the Fed’s report.

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