Highlights of the Fed's Beige Book: Overall economic activity increases slightly since May

<p>Overall Economic Activity:</p><ul><li>Overall economic activity experienced a slight increase since late May.</li><li>Five districts reported slight/modest growth, five saw no change, and two noted slight/modest declines.</li><li>Consumer spending patterns were mixed, with growth seen in services but a shift away from discretionary spending in some areas.</li><li>Tourism and travel activities were strong, predicting a busy summer season.</li><li>Auto sales remained constant or showed moderate growth in most districts.</li><li>Manufacturing activity increased in half of the districts, while the other half saw a decline.</li><li>Transportation activity was mostly down or flat, attributed to high inventory levels and labor shortages.</li><li>Banking conditions remained subdued, with a continuing decrease in lending activity.</li><li>Despite higher mortgage rates, demand for residential real estate held steady, but sales were limited by low inventories.</li><li>Both residential and commercial construction activity was slightly down.</li><li>Geographically mixed agricultural conditions softened overall, with an expectation for more softening throughout 2023.</li><li>Energy sector activity decreased.</li><li>The economic forecast for the upcoming months anticipates slow growth.</li></ul><p>Conclusion: A lot of mixed in overall economic activity.</p><p>Employment:</p><ul><li>Employment increased modestly across most Districts.</li><li>Labor demand remained healthy, with some reports of hiring becoming more targeted and selective.</li><li>Employers continued to face challenges in finding workers, particularly in healthcare, transportation, hospitality, and for high-skilled positions.</li><li>Many Districts noted improved labor availability, with some employers finding it easier to hire than previously.</li><li>High turnover rates experienced in recent years appear to be returning to pre-pandemic norms.</li><li>Wage growth continued but at a more moderate pace, with multiple Districts reporting wage increases returning to or nearing pre-pandemic levels.</li></ul><p>Conclusion: Labor remains strong but off the boil</p><p>Prices:</p><ul><li>Prices increased overall at a modest pace, with several Districts observing a slowdown in the pace of increase.</li><li>Consumer prices generally increased, although reports varied on the ability of firms to pass along input cost increases.</li><li>Some Districts reported reluctance from firms to raise prices due to heightened consumer price sensitivity.</li><li>Other Districts noted that solid demand enabled firms to maintain margins despite rising costs.</li><li>Input cost pressures remained high for service firms, but notably eased in the manufacturing sector.</li><li>Freight rates and the prices of many construction inputs continued to decrease, while concrete prices increased.</li><li>Over the next several months, price expectations were generally stable or lower.</li></ul><p>Conclusion: A tilt to the downside</p><p>Looking at the districts:</p><ul><li><p>Boston: Business activity expanded slightly. Employment gains were small, prices were stable, and consumer spending increased marginally.</p></li><li><p>New York: Regional economic activity stabilized after a period of weakness. Labor market conditions were strong, and inflationary pressures eased noticeably.</p></li><li><p>Philadelphia: Business activity continued to decline slightly. Employment fell slightly despite improved labor availability.</p></li><li><p>Cleveland: The economy was generally stable. High interest rates continued to constrain households' big-ticket goods purchases and businesses' project plans.</p></li><li><p>Richmond: The regional economy grew slightly. Consumer spending on retail goods, as well as on travel and tourism, picked up modestly.</p></li><li><p>Atlanta: Economic activity grew slowly. Labor markets became less tight, and wage pressures eased.</p></li><li><p>Chicago: Economic activity was little changed. Employment increased moderately, and consumer spending was flat.</p></li><li><p>St. Louis: Economic conditions remained unchanged. Employers continued to struggle finding skilled workers, but turnover slowed and wage pressures lessened.</p></li><li><p>Minneapolis: Economic activity in the region grew slightly. Employment rose moderately as labor availability improved.</p></li><li><p>Kansas City: Total economic activity changed little during June. Hiring was flat, expected employment levels at most businesses continued to point downward.</p></li><li><p>Dallas: Modest expansion continued buoyed by gains in the service sector and single-family housing. Employment rose moderately, and wage growth remained high.</p></li><li><p>San Francisco: Economic activity softened modestly. Labor availability improved across sectors. Wage growth slowed notably while price increases persisted.</p></li></ul>

This article was written by Greg Michalowski at www.forexlive.com.