April 2021 Beige Book: Growth Improves to “Moderate”

Written by Steven Hansen

The consolidated economic report from the 12 Federal Reserve Districts (Beige Book) stated: “National economic activity accelerated to a moderate pace from late February to early April“. The previous report stated: “Economic activity expanded modestly from January to mid-February for most Federal Reserve Districts“.

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 Dallas based on information collected on or before April 5, 2021.

National economic activity accelerated to a moderate pace from late February to early April. Consumer spending strengthened. Reports on tourism were more upbeat, bolstered by a pickup in demand for leisure activities and travel which contacts attributed to spring break, an easing of pandemic-related restrictions, increased vaccinations, and recent stimulus payments among other factors. Auto sales grew, even as new-vehicle inventories remained constrained by microchip shortages. The picture in nonfinancial services generally improved, partly supported by strengthening demand for transportation, professional and business, and leisure and hospitality services. Despite widespread supply chain disruptions, manufacturing activity expanded further with half the Districts citing robust growth. Bankers in most reporting Districts saw modest to moderate increases in overall loan volumes. Sustained high demand and tight supply of single-family homes further pushed up prices, and builders noted ongoing production challenges, including rising costs. Reports on commercial real estate and construction varied, with activity in the hotel, office, and retail segments generally remaining weak. Agricultural conditions were mostly stable over the reporting period. Activity in the energy sector was mixed; coal production fell, while oil and gas drilling was flat to up. Outlooks were more optimistic than in the previous report, boosted in part by an acceleration in COVID-19 vaccinations.

Employment and Wages
Employment growth picked up over the reporting period, with most Districts noting modest to moderate increases in headcounts. The pace of job growth varied by industry but was generally strongest in manufacturing, construction, and leisure and hospitality. Hiring remained a widespread challenge, particularly for low-wage or hourly workers, restraining job growth in some cases. Commercial and delivery drivers were specifically cited as in short supply, as were specialty and skilled tradespeople. Some firms noted absenteeism due to COVID-19 was down. Employment expectations were generally bullish. Wage growth accelerated slightly overall, with more significant wage pressures in industries like manufacturing and construction where finding and retaining workers was particularly difficult. Some contacts mentioned raising starting pay and offering signing bonuses to attract and retain employees.

Prices
Prices accelerated slightly since the last report, with many Districts reporting moderate price increases and some saying prices rose more robustly. Input costs rose across the board, but especially in the manufacturing, construction, retail, and transportation sectors—specifically, metals, lumber, food, and fuel prices. Cost increases were partly attributed to ongoing supply chain disruptions, temporarily exacerbated in some cases by winter weather events. There were widespread reports of increased selling prices also, but typically not on pace with rising costs. Contacts generally expect continued price increases in the near term.

Highlights by Federal Reserve District

Boston
Economic activity in the First District expanded at a modest to moderate pace in late February and March. Tourism seemed poised for a summer rebound. Two firms enacted large layoffs, but otherwise headcounts were stable or up. The outlook was mostly optimistic, but several contacts expressed growing concerns about inflation.

New York
The regional economy grew at a strong pace for the first time during the pandemic, with growth broad-based across industries. Hiring picked up and wages continued to grow moderately. Consumer spending and tourism picked up noticeably. Input price pressures have intensified, and more businesses are raising their selling prices.

Philadelphia
Business activity picked up to a moderate pace of growth during the current Beige Book period. However, severe myriad supply constraints continued to hamper potential growth from demand described as “on fire,” and activity remained below levels attained prior to the pandemic. Employment ticked up modestly, as wage growth and prices continued at modest and moderate paces, respectively.

Cleveland
The District’s expansion accelerated with a new round of government stimulus and more widely available vaccines. There were even signs of improvement in the hard-hit accommodation and food services sector. Supply chain disruptions spread, however, limiting growth and putting upward pressure on input costs. Looking forward, firms expect the economy to grow robustly in 2021 as supply chain constraints ease later in the year.

Richmond
The regional economy grew moderately in recent weeks. Production increased strongly and importing picked up, leading to high volumes for ports and trucking companies. Consumer spending also picked up. Both manufacturers and retailers faced delays and shortages of raw materials and finished goods. Employment increased and firms looked to fill open positions. On balance, prices rose moderately.

Atlanta
Economic activity expanded at a modest pace. Labor market conditions improved. Some nonlabor costs continued to rise. Retail sales increased. Hospitality and tourism activity strengthened. Residential real estate activity remained strong and home prices rose. Commercial real estate conditions were mixed. Manufacturing activity improved. Banking conditions were stable.

Chicago
Economic activity increased moderately. Employment, consumer spending, business spending and manufacturing production increased moderately, while construction and real estate was flat. Wages and prices rose modestly. Financial conditions were little changed. Prospects for agriculture income in 2021 improved.

St. Louis
Reports from contacts indicate that economic conditions have been moderately improved since our previous report. Many contacts cited faster-than-expected pace of vaccinations for stronger-than-expected activity and an improving outlook.

Minneapolis
The District economy grew moderately, with signs of acceleration. Job openings and employment rose, but unemployed workers faced obstacles in job searches. Construction showed renewed signs of growth, manufacturing continued to increase, and higher commodity prices benefited farmers. Despite improved oil prices, drilling remained subdued. Minority-owned firms reported more financial instability than firms overall.

Kansas City
Economic activity expanded moderately in March, and contacts were optimistic about growth in the coming months. Consumer spending rose moderately as retail, restaurant, auto, and tourism sales increased. Activity also expanded moderately in the manufacturing, professional and high-tech services, wholesale trade, transportation, residential real estate, and energy sectors.

Dallas
The District economy accelerated and was boosted by strong growth in manufacturing, retail, and nonfinancial services. Activity in the housing market remained robust, and energy activity rose further. Supply chain disruptions led to marked increases in goods prices. Outlooks were more positive and less uncertain than in the previous reporting period.

San Francisco
Economic activity in the District expanded at a moderate pace as labor markets conditions improved. Wages and inflation picked up. Retail sales growth accelerated, while activity in the services sector rose slightly. Conditions in the manufacturing sectors strengthened modestly. Residential construction continued to be strong. Lending activity grew further but loan refinancing tapered somewhat.

Source

https://www.federalreserve.gov/monetarypolicy/beigebook202104.htm

Fed’s Words When Economy is entering a Recession

For the current recession:

• 04Mar2020 -“Economic activity expanded at a modest to moderate rate over the past several weeks”
• 15Apr2020 – “Economic activity contracted sharply and abruptly across all regions in the United States as a result of the COVID-19 pandemic”
• 27May2020 – “Economic activity declined in all Districts – falling sharply in most – reflecting disruptions associated with the COVID-19 pandemic”

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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