WASHINGTON— Economic activity has been unchanged on balance since early July, with five Federal Reserve districts reporting slight to modest growth in activity and five others reporting slight to modest softening, according to its latest Beige Book data.
Most districts reported steady consumer spending as households continued to trade down and to shift spending away from discretionary goods and toward food and other essential items. Auto sales remained muted across most Districts, reflecting limited inventories and elevated prices, the Fed stated.
“Hospitality and tourism contacts highlighted overall solid leisure travel activity with some reporting an uptick in business and group travel,” according to the Fed.
“Manufacturing activity grew in several Districts, although there were some reports of declining output as supply chain disruptions and labor shortages continued to hamper production.”
Despite some reports of strong leasing activity, the Beige Book reports residential real estate conditions weakened noticeably as home sales fell in all 12 Districts and residential construction remained constrained by input shortages.
CRE Activity
“Commercial real estate activity softened, particularly demand for office space,” the analysis states. “Loan demand was mixed; while financial institutions reported generally strong demand for credit cards and commercial and industrial loans, residential loan demand was weak amid elevated mortgage interest rates.”
Nonfinancial services firms experienced stable to slightly higher demand. Demand for transportation services was mixed and reports on agriculture conditions across reporting districts varied, according to the Fed.
“While demand for energy products was robust, production remained constrained by supply chain bottlenecks for critical components. The outlook for future economic growth remained generally weak, with contacts noting expectations for further softening of demand over the next six to twelve months,” the Fed said.
Employment Growth
Meanwhile, employment rose at a modest to moderate pace in most Districts. Overall labor market conditions remained tight, although nearly all districts highlighted some improvement in labor availability, particularly among manufacturing, construction, and financial services contacts, according to the Beige Book.
“Moreover, employers noted improved worker retention, on balance. Wages grew across all districts, although reports of a slower pace of increase and moderating salary expectations were widespread,” the Fed explained. “Employers in several districts reported giving midyear and off-cycle raises to offset higher living costs, and many noted that offering bonuses, flexible work arrangements, and comprehensive benefits were deemed necessary to attract and retain workers. Looking ahead, employers planned to provide end-of-year pay raises to their workers, but expectations for the pace of wage growth varied across industries and districts.”
Elevated Prices
The Federal Reserve said price levels remained highly elevated, but nine Districts reported some degree of moderation in their rate of increase. Substantial price increases were reported across all Districts, particularly for food, rent, utilities, and hospitality services.
“While manufacturing and construction input costs remained elevated, lower fuel prices and cooling overall demand alleviated cost pressures, especially freight shipping rates. Several districts reported some tapering in prices for steel, lumber, and copper. Most contacts expected price pressures to persist at least through the end of the year,” the Fed explained.