Wednesday, July 16, 2014

Beige Book: U.S. Economy Grew at “Moderate to Modest Pace”

The Federal Reserve’s Beige Book, released today indicated that economic expansion is continuing at a “moderate to modest pace,” a slight slowdown from the previous report. Reports from Boston, New York, Chicago, Minneapolis, Dallas and San Francisco all indicated moderate growth. Philadelphia, Atlanta, Cleveland, Kansas and St. Louis districts saw the pace of growth improve modestly, while the pace slowed slightly in the Boston and Richmond districts.

Consumer spending expanded in every district, a positive sign for second quarter GDP growth. Vehicle sales remained strong, with several districts reporting robust and strong auto sales. Summer tourism was strong as, “tourism activity expanded in all reporting Districts, with growth ranging from slight in Philadelphia to very strong in Boston.” The districts are more optimistic for future growth.

Manufacturing also expanded in each district. The two strong segments to improve were metal and auto industries and the energy sector.

Loan volumes increased since the last reporting period. San Francisco was the only district to note a slight decline in credit quality. Notably, Philadelphia and Chicago mentioned that competitive pressures were leading some financial institutions to add more loans to their portfolios.

The report noted that market conditions improved in all the districts. Continuing a recent trend, many districts report difficulty filling qualified workers for high-skilled positions. Notably, the districts reported upward wage pressures, a positive sign of a growing economy. Moreover, the wage pressure was generally for lower skilled positions, which have the stickiest wages since the recession.

Most districts reported modest price increases. Price raises were highest for meat, dairy products, construction materials, and some metals (namely steel, copper, and nickel).

Read the Federal Reserve release.

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