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Thursday, October 16, 2014

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

The Federal Reserve’s Beige Book, released yesterday indicated that economic expansion is continuing at a “modest to moderate" pace, a slowdown from the previous report. Reports from Cleveland, Chicago, St. Louis, Minneapolis, Dallas, and San Francisco Districts all indicated moderate growth. The New York, Philadelphia, Richmond, Atlanta, and Kansas City Districts saw the pace of growth improve modestly. Growth in the Boston District was mixed. Several districts were generally optimistic about future growth.

The growth in consumer spending ranged from slight to moderate, with a pace similar to the previous report. Notably, the New York District reported that general merchandise sales slowed. While auto sales varied across districts, most reported a positive outlook and growth. Tourism activity was reported to have increased across much of the nation, with many Districts reporting higher hotel occupancy rates and optimism about the remainder of 2014 and 2015.

Manufacturing growth generally increased since the last report, with many districts reporting a positive outlook. The two weak spots were that, “New York noted that manufacturing growth had stalled, and Boston indicated that their contacts cited weaker results than in the past few reports.”

Loan volumes generally increased since the last reporting period. Credit standards generally remained unchanged since the previous Beige Book. The bright spots were that, “New York reported... delinquency rates continued to decline, particularly for commercial loans and mortgages. Philadelphia banking contacts described steady improvement in credit quality, and San Francisco noted that asset quality has improved since the previous report.”

The report noted that the pace of employment growth remained the same since the last reporting period. Continuing a recent trend, many districts report difficulty filling qualified workers for high-skilled positions. Notably, the districts reported increased upward pressure for wage growth, particularly for skilled labor. The report stated that, “Cleveland, Richmond, and Kansas City noted upward wage pressures for transportation workers; Richmond also reported upward wage pressures for skilled engineers, managers, information technology professionals, and bankers. San Francisco noted that software developers were receiving above-average wage increases. New York reported that workers were more frequently leaving jobs for higher pay, while a contact in the St. Louis District noted increased turnover of skilled employees who were switching to higher-paying jobs.”

Read the Federal Reserve release.

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