Fed’s Beige Book Shows ‘Modestly’ Expanded Economic Activity

This report was prepared at the Federal Reserve Bank of New York based on information collected on or before January 6, 2020. This document summarizes comments received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.

Overall Economic Activity
Economic activity generally continued to expand modestly in the final six weeks of 2019. The Dallas and Richmond Districts noted above-average growth, while Philadelphia, St. Louis, and Kansas City reported sub-par growth. Consumer spending grew at a modest to moderate pace, with a number of Districts noting some pickup from the prior reporting period. On balance, holiday sales were said to be solid, with several Districts noting the growing importance of online shopping. Vehicle sales generally expanded moderately, though a handful of Districts reported flat sales. Tourism was mixed, with growth reported in the eastern seaboard Districts but activity little changed in the Midwest and West. Manufacturing activity was essentially flat in most Districts, as in the previous report. Business in nonfinancial services was mixed but, on balance, growing modestly. Transportation activity was also mixed across Districts, with a majority reporting flat to weaker activity. Banks mostly characterized loan volume as steady to expanding moderately. Home sales trends varied widely across Districts but were flat overall, while residential rental markets strengthened. Some Districts pointed to low inventories as restraining home sales. New residential construction expanded modestly. Commercial real estate activity varied substantially across Districts. Agricultural conditions were little changed, as was activity in the energy sector. In many Districts, tariffs and trade uncertainty continued to weigh on some businesses. Expectations for the near-term outlook remained modestly favorable across the nation.

Employment and Wages
Employment was steady to rising modestly in most Districts, while labor markets remained tight throughout the nation. Most Districts cited widespread labor shortages as a factor constraining job growth, and, in a few cases, business expansion. A few Districts noted brisk demand for professional, technical, and managerial workers. A number of Districts reported job cuts or reduced hiring among manufacturers, and there were scattered reports of job cuts in the transportation and energy sectors. Wage growth was characterized as modest or moderate in most Districts—similar to the prior reporting period—and there were scattered reports of wage increases from year-end hikes in minimum wages. A few Districts also noted the use of benefits, incentives, training programs, and automation to reduce vacancies.

Prices
Prices continued to rise at a modest pace during the reporting period, as did input costs. A number of Districts reported that retail selling prices rose at a slightly faster, but still subdued, pace. A few Districts indicated that some businesses were passing along tariff costs to consumers—mostly in retail but also in construction. Some Districts noted that restaurants were being pressured by rising food prices. There were scattered reports of declining prices in some manufacturing industries, as well as in the energy sector. Those Districts reporting on price expectations indicated that prices were expected to continue to rise in the months ahead.

Highlights by Federal Reserve District

Boston
Economic activity expanded at a modest to moderate pace in the closing weeks of 2019. Software and IT services firms cited relatively strong growth; manufacturers and retailers also reported revenue increases from a year earlier. Residential real estate markets saw continued inventory shortages. Labor market tightness persisted. Outlooks were positive.

New York
The regional economy expanded at a modest pace. The labor market remained tight, though hiring activity was subdued and wages grew modestly. Manufacturing activity picked up. Loan demand grew, though financial sector contacts more broadly reported weakening activity. Both input prices and selling prices continued to rise modestly.

Philadelphia
On balance, business activity slowed to a slight pace of growth during the current Beige Book period. Labor markets remained tight throughout the District—slowing employment growth and raising wage pressure. Still, price increases remained modest. Most firms expressed cautious optimism.

Cleveland
The Fourth District economy continued to expand at a modest pace as a result of continuing strength in some key sectors and waning headwinds from manufacturing and freight. Retailers reported better-than-expected holiday sales amid tight labor markets, modest wage gains, and improved consumer confidence. Meanwhile, selling prices advanced at a steady, modest rate.

Richmond
On balance, the Fifth District economy grew moderately. Retail, travel, and tourism picked up. Home sales and commercial real estate leasing and construction remained strong. However, manufacturing slowed slightly as tariff and other trade policy uncertainties continued. Labor markets were strong and wages rose moderately. Price growth remained moderate, overall.

Atlanta
Economic conditions improved modestly. Labor market tightness continued, and wage pressures increased for some positions. Non-labor input costs rose, in line with expectations. Retail sales and tourism activity were strong. Residential real estate conditions improved, and commercial real estate activity remained positive. Manufacturing activity slowed during the reporting period.

Chicago
Economic activity increased modestly. Consumer spending increased modestly, while business spending and construction and real estate activity increased slightly. Manufacturing and employment were little changed. Wages and prices rose slightly and financial conditions improved modestly. The prospects of a trade deal with China boosted farmers’ outlooks.

St. Louis
Reports from contacts indicate that economic conditions have slightly improved since our previous report. St. Louis region general retailers had mixed accounts of holiday sales. Area tourism and hospitality contacts generally cited that business activity met expectations over the holiday season.

Minneapolis
Ninth District economic activity grew at a modest pace. Employment was mixed across states in the region. Consumer spending rose, with initial reports on holiday sales coming in positive. Manufacturing activity was flat overall, as slower recent activity contrasted with optimistic expectations for 2020. Commercial and residential construction grew modestly. Oil and gas drilling activity held steady.

Kansas City
District economic activity edged up in late November and December, driven by robust retail spending during the holiday season and stronger sales in the professional and high-tech services and wholesale trade sectors. In contrast, manufacturing activity and sales in the transportation sector continued to decline. Economic activity in the energy and agriculture sectors also remained weak.

Dallas
Economic activity expanded solidly, with growth increasing in most sectors. Home sales continued to rise while energy activity remained weak. Hiring continued at a steady pace. Selling prices were largely flat, even as input prices rose. Outlooks generally improved, with reduced trade uncertainty boosting optimism.

San Francisco
Economic activity in the Twelfth District expanded at a modest pace. The labor market remained tight, and wages increased further. Price inflation was up slightly. Sales of retail goods increased moderately, and consumer and business services activity was up modestly. Commerce in the manufacturing sector was stable, and activity in the agriculture sector was mixed. The residential real estate market expanded strongly, while commercial real estate activity softened a bit. Lending grew steadily.

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Source: BOARD OF GOVERNORS of the FEDERAL RESERVE SYSTEM