U.S. economic activity “expanded modestly” in recent weeks, the Federal Reserve said in its latest Beige Book report on the U.S. economy. That’s better than the roughly flat picture portrayed in the previous report that was issued on Sept. 7.
Retail activity was relatively flat, while tourist activity “rose strongly.” Manufacturing activity was steady or expanded in most of the Fed’s 12 districts, in part due to easing supply chain disruptions.
The Fed’s Beige Book collects observations across all of the country’s Federal Reserve Bank districts in assessing the health of the economy. This latest report is based on information collected on or before Oct. 7, 2022.
With the central bank raising its policy rate, higher mortgage rates and elevated housing prices continue to weaken homebuilding and sales. In addition, commercial real estate activity has slowed. Industrial leasing remained strong, and office demand remains tepid.
Inflation, of course, remained an issue, with price growth remaining elevated. Some easing was noted in several districts, it said. Significant input prices were reported in a number industries. However, there were some declines in commodity, fuel, and freight costs.
Those higher prices are likely key for the flat retail environment, as consumers cut back on discretionary spending. “Auto dealers noted sustained sluggishness in sales stemming from limited inventories, high vehicle prices, and rising interest rates,” according to the report.
The labor market remained strong as employment rose at a “modest to moderate pace” in most districts. Several, though, reported a cooling in demand for labor. “There were also scattered mentions of hiring freezes,” the report said.
The Fed’s business contacts expect wage growth to continue as higher pay is seen as essential to keeping workers in a tight labor market.
By district, San Francisco, Dallas, Kansas City, Minneapolis, Atlanta, and Boston reported increases in business activity, while Philadelphia, Cleveland, Richmond, and Chicago said activity was relatively flat. In New York, economic activity contracted at a “modest pace” and in St. Louis economic conditions declined slightly.
Earlier, Minneapolis Fed President Neel Kashkari said headline inflation has possibly peaked, but core figure is a bigger concern