Modest/moderate growth overall, some tariff concerns cited in Fed’s latest ‘Beige Book’

Economic outlooks throughout the Federal Reserve System’s 12 districts remained positive in March and early April, with increasing loan demand, overall, among the findings. But the Fed’s Beige Book survey, which draws its input from external contacts throughout the districts, also cited some concerns in the manufacturing, agriculture and transportation sectors about newly imposed and/or proposed tariffs.

“There were scattered reports of companies successfully passing through price increases to customers in manufacturing, information technology, transportation, and construction,” the Fed reported Wednesday. “Businesses generally anticipate further price increases in the months ahead, particularly for steel and building materials.”

Prices overall were up moderately, but the Fed noted widespread reports that steel prices rose, sometimes dramatically, due to the new tariff. Prices rose “briskly” for building materials, and transportation prices were up (with reports of higher fuel prices and shortages of truck drivers).

According to the report, consumer spending was up in most regions, with gains noted for non-auto retail sales and tourism but mixed results for vehicle sales. Manufacturing activity rose moderately. Demand for nonfinancial services was mostly “solid.” Additionally, residential construction and real estate activity continued to grow even though low home inventories continued to constrain sales in several districts.

Loan demand increased, and commercial real estate activity and construction improved since the last report.

The Fed cited continued growth in employment, with most districts describing the growth as modest to moderate. Labor markets remained tight and restrained job gains in some regions, and the Fed’s contacts cited continued difficulties finding qualified candidates. Labor shortages were most often associated with high-skill positions such as engineering, information technology and health care, as well as construction and transportation. Upward wage pressures “persisted but generally did not escalate,” the Fed found, with only modest wage growth reported in most districts.

The Fed produces a Beige Book eight times a year based on anecdotal information collected by the Fed’s 12 district banks. Wednesday’s was the Fed’s third Beige Book of 2018; reports also came out in early March and mid-January.

Federal Reserve Beige Book (April 2018)