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posted on 17 January 2018

January 2018 Beige Book: Reading Between The Lines - Rate Of Economic Expansion Little Changed

Written by Steven Hansen

The consolidated economic report from the 12 Federal Reserve Districts (Beige Book) stated the "economy continued to expand from late November through the end of the year, with 11 Districts reporting modest to moderate gains and Dallas recording a robust increase". The previous report stated "activity continued to increase at a modest to moderate pace in October and mid-November".

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 Atlanta based on information collected on or before January 8, 2018. The summary for this release:

Overall Economic Activity
Reports from the 12 Federal Reserve Districts indicated that the economy continued to expand from late November through the end of the year, with 11 Districts reporting modest to moderate gains and Dallas recording a robust increase. The outlook for 2018 remains optimistic for a majority of contacts across the country. Most Districts reported that non-auto retail sales expanded since the last report and that auto sales were mixed. Some retailers highlighted that holiday sales were higher than expected. Residential real estate activity remained constrained across the country. Most Districts reported little growth in home sales due to limited housing inventory. Nonresidential activity continued to experience slight growth. Most manufacturers reported modest growth in overall business conditions. Reports indicated that some manufacturers increased capital expenditures over the reporting period. Most reporting Districts noted continued growth in transportation activity. Loan volumes in many Districts were steady. Among reporting Districts, agricultural conditions were mixed and energy contacts described a slight uptick in activity.

Employment and Wages
On balance, employment continued to grow at a modest pace since the previous report. Most Districts cited on-going labor market tightness and challenges finding qualified workers across skills and sectors, which, in some instances, was described as constraining growth. Several Districts noted elevated demand for manufacturing and construction labor. Most Districts said that wages increased at a modest pace. A few Districts observed that firms were raising wages in a broader range of industries and positions since the previous report. Some Districts reported that firms expect wages to increase in the months ahead.

Most Districts reported modest to moderate price growth since the last report; exceptions were Chicago, which noted that prices increased only slightly while San Francisco noted price inflation was down slightly. Reports of pricing pressures were mixed across the country although several Districts noted increases in manufacturing, construction, or transportation input costs. Firms in some Districts noted an ability to increase selling prices. Retailers in some Districts reported modest price increases and there were reports of rising home prices across most of the country. Agriculture and energy commodity prices were mixed.

Highlights by Federal Reserve District

Economic activity expanded at a modest pace as 2017 ended, with the majority of contacts at manufacturing, retail, and software and information technology firms reporting revenue increases even as some saw flat or declining revenue. Employers cited tight labor markets as a constraint on expansion. Respondents' outlooks continued to be positive.

New York
Economic activity continued to expand moderately, while labor markets have remained tight. Input prices have increased at a somewhat faster pace, while selling prices continued to rise modestly. Housing markets and commercial real estate markets have been mixed but generally steady overall.

Economic activity continued to grow at a modest pace, in particular for manufacturing, nonfinancial services, and tourism. Nonauto retail sales improved to a modest pace as auto sales slipped to a modest decline. The construction and real estate sectors changed little. On balance, employment, wages, and prices continued to grow modestly.

The economy continued to expand at a moderate pace. Labor markets tightened, with wage pressures coming primarily from workers in low- and middle-skills jobs. Retailers reported higher-than-expected revenues for the early part of the holiday shopping season. Homebuilders saw little evidence of a seasonal downturn in the housing market.

The regional economy grew at a moderate pace in recent weeks. Robust growth was reported by trucking and tourism firms. Retailers generally reported better-than-expected holiday sales. Meanwhile, commercial real estate activity and commercial lending improved moderately. Labor markets tightened further and wage pressures broadened. Price growth remained modest.

Economic activity improved modestly since the previous report. The labor market remained tight and wage increases were stable. Non-labor input costs picked up slightly. Retailers were optimistic when reporting on holiday sales. Home sales were mixed and prices increased modestly. Commercial real estate contacts continued to indicate improving demand. Manufacturers noted an increase in new orders.

Economic activity picked up to a moderate pace. Employment, consumer spending, and manufacturing production increased moderately, construction and real estate activity rose slightly, and business spending was unchanged. Wages increased modestly, prices rose slightly, and financial conditions improved some. Crop and dairy farmers continued to face challenging conditions.

St. Louis
Economic conditions continued to improve at a modest pace. In positive news, retailers' reports of holiday sales were generally upbeat, and real estate activity has picked up somewhat. However, auto dealers continued to report mixed sales results, and agriculture conditions in the District remain weak.

Ninth District economic activity grew moderately. Although employment levels dipped, hiring demand appeared to remain strong. District manufacturers indicated that a solid 2017 would continue, with upbeat expectations for the year to come. Holiday retail spending was strong, but winter tourism got off to an uneven start. Commercial construction increased; homebuilding was mixed, but residential sales were up.

Kansas City
Economic activity and employment expanded modestly in late November and December. Retail sales increased sharply, and consumer spending remained well above year-ago levels. The manufacturing and energy sectors expanded further, and capital spending plans were positive. A majority of contacts in the services sector reported labor shortages, and strong wage growth was anticipated in the months ahead.

Economic activity grew robustly, a pickup in pace from the more moderate expansion seen throughout most of 2017. The manufacturing sector remained a bright spot, although growth accelerated in most other sectors as well. Employment growth picked up, and wage and price pressures remained elevated. Labor shortages persisted, with several reports that difficulty hiring was impeding growth to some extent.

San Francisco
Economic activity in the Twelfth District continued to expand at a moderate pace. Sales of retail goods picked up noticeably, 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 modest pace.

[click here to read the entire release]

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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