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posted on 29 November 2017

November 2017 Beige Book: Reading Between The Lines - Rate Of Economic Expansion Unchanged

Written by Steven Hansen

The consolidated economic report from the 12 Federal Reserve Districts (Beige Book) stated "activity continued to increase at a modest to moderate pace in October and mid-November". The previous report stated "activity increased in September through early October, with the pace of growth split between modest and moderate".

Analyst Opinion of this month's Beige Book

Seems like the rate of growth was little changed from the last report.

Please see the end of this post for words the Federal Reserve uses when the economy is entering a recession. The Beige Book completely missed the 2001 recession, and was late in seeing the Great Recession.

This report was prepared at the Federal Reserve Bank of Minneapolis based on information collected on or before October 6, 2017. The summary for this release:

Overall Economic Activity

Economic activity continued to increase at a modest to moderate pace in October and mid-November, according to anecdotal reports from contacts across the 12 Federal Reserve Districts. There was a slight improvement in the outlook among contacts in reporting Districts. Pre-holiday reports of consumer spending on retail and autos were mixed but largely flat; still, the outlook for holiday sales was generally optimistic. Many Districts highlighted growth in the transportation sector, although the New York District reported a slight softening and the San Francisco District noted that Northern California wildfires temporarily reduced shipping volumes. Residential real estate activity remained constrained, with most Districts reporting little growth in sales or construction. By contrast, nonresidential activity was consistent with previous reports of slight growth. Loan demand was steady to moderately stronger. All Districts reported that manufacturing activity expanded during the reporting period, with most describing growth as moderate. Among reporting Districts, manufacturing contacts predominantly expected activity to continue to pick up, although the Philadelphia and St. Louis Districts noted signs of a slowdown.

Employment and Wages

Employment growth has increased since the previous report, with most Districts characterizing growth as modest to moderate. Reports of tightness in the labor market were widespread. Most Districts reported employers were having difficulties finding qualified workers across various skill levels, and several Districts reported that an inability to find workers with the required skills was a key factor restraining hiring plans. Wage growth was modest or moderate in most Districts. Wage increases were most notable for professional, technical, and production positions that remain difficult to fill. Many Districts reported that employers were raising wages as well as increasing their use of signing bonuses and other nonwage benefits to retain or attract employees.


Price pressures have strengthened since the last report. Most Districts reported modest to moderate growth in selling prices and moderate increases in non-labor input costs. In particular, construction-material costs rose in most regions, with many Districts citing increased lumber costs and/or increases in demand for materials due to hurricane rebuilding efforts. Residential real estate prices generally increased as well. There were also reports of increases in costs in the transportation sector. Additionally, several Districts noted input cost increases in manufacturing. In many cases, these increases in transportation and manufacturing were passed through to consumers. Fuel prices also rose, with multiple Districts reporting upward pressure on oil and natural gas prices. However, agricultural price pressures remain mixed.

Highlights by Federal Reserve District

Economic activity continued to expand at a modest to moderate pace according to responding manufacturers, retailers, and staffing services firms. Labor markets remained tight and some employers reported modest wage increases. Price changes, if any, were limited. Respondents' outlooks continued to be positive.

New York
Economic activity continued to expand moderately, while labor markets have remained tight. Input prices continued to rise moderately, and selling prices rose modestly. Housing markets and commercial real estate markets have been mixed but generally stable.

Overall, economic activity continued at a modest pace of growth, in particular for manufacturing, nonfinancial services, and tourism. Residential and nonresidential construction and real estate activity increased slightly, while auto sales and non-auto retail sales declined slightly. On balance, wages and prices continued to grow modestly, while employment resumed a modest pace of growth.

Business activity increased from that of the previous reporting period, but the overall pace of growth was moderate. Upward pressure increased further on wages, non-labor input costs, and selling prices. Retailers noted a boost in store traffic. Capacity constraints in freight transportation tightened. The first-time home-buyer market may be negatively impacted by rising costs and low inventory.

The regional economy continued to grow at a moderate rate, overall. Manufacturing and transportation activity remained strong. Retailers were optimistic about the upcoming holiday shopping season. Residential home sales rose only modestly due to low inventories. Labor markets tightened further, which drove up wages for some workers. Price growth remained modest, overall.

Economic conditions modestly improved since the previous report. Tightness in the labor market persisted and wages grew modestly. Non-labor costs remained little changed. Retail sales increased across most of the District. Tourism activity was mostly positive. Home sales were flat to down, and home prices improved slightly. Manufacturers indicated that activity modestly increased. Credit was available.

Economic activity increased slightly. Employment and manufacturing production increased modestly, while consumer spending, business spending, and construction and real estate activity increased slightly. Wages rose modestly and prices rose slightly. Financial conditions were little changed. Crop yields were below last year's records.

St. Louis
Economic conditions have improved at a modest pace since our previous report. Labor market conditions remain tight, as most firms reported raising starting wages and salaries as a way to attract new workers. The outlook among firms surveyed in mid-November was generally optimistic. Though slightly weaker than the outlook from our mid-August survey, it is a modest improvement from the outlook one year ago.

Economic activity in the Ninth District grew modestly. Employment continued to grow, though constrained by tight labor and some isolated softness, including plant closures. Several indicators suggested that conditions in South Dakota were improving. Manufacturing remained upbeat, and commercial and residential real estate saw growth. Agriculture continued to struggle, as strong harvests were not expected to offset low commodity prices.

Kansas City
Economic activity in the Tenth District increased moderately. Manufacturing and other business services expanded at a strong to moderate pace, and energy activity continued to increase modestly. Consumer spending was mostly flat, with moderate growth expected. Agricultural conditions weakened but at a slower pace, and many respondents noted increased hiring plans.

Economic activity grew moderately, and business had mostly returned to normal after Hurricane Harvey. The manufacturing sector remained a bright spot, and nonfinancial services activity continued to expand. Growth in the energy sector subsided, but there was increased optimism for 2018. Retail sales remained strong and auto sales were still elevated, but the initial post-hurricane surge had begun to recede. Labor shortages persisted, and there were widespread reports of increased wages.

San Francisco
Economic activity in the Twelfth District continued to expand at a moderate pace. Sales of retail goods grew moderately, and growth in the consumer and business services sectors remained strong. Conditions in the manufacturing sector remained solid. Activity in residential real estate markets remained robust, while conditions in the commercial sector were strong. Lending activity grew at a moderate pace.

Fed's Words When Economy is entering a Recession

For the recession starting December 2007, here is the lead up summary words from the Beige Books:

  • 28Nov2007 - "expanding"
  • 16Jan2008 - "increasing moderately"
  • 05Mar2008 - "growth slowed"
  • 16Apr2008 - "weakened"

For the March 2001 recession which ended in November 2001, here are the Beige Book summary words:

  • 17Jan2001 - "economic growth slowed"
  • 07Mar2001 - "sluggish to modest economic growth"
  • 02May2001 - "slow pace of economic activity"
  • 13Jun2001 - "little changed or decelerating"
  • 08Aug2001 - "slow growth or lateral movement"
  • 19Sep2001 - "sluggish"
  • 24Oct2001 - "weak economic activity"
  • 28Nov2001 - "remained soft"
  • 16Jan2002 - "remained weak"

Source: Federal Reserve

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