Most of the twelve Federal Reserve districts reported that their economies continued to expand at a modest or moderate pace from early April through late May since the previous Beige Book report.
The majority of districts continued to report moderate growth in manufacturing activity and in most nonfinancial service sectors. Boston and Chicago signaled that growth in their districts had slowed somewhat to a modest pace since the prior Beige Book period, while New York indicated that activity had flattened out. Philadelphia, Richmond, Atlanta, St. Louis and Minneapolis all continued to grow at a modest pace. Economic activity in Kansas City, Dallas and San Francisco increased moderately.
Of the eight firms contacted in mid-May, three reported lower sales, one reported flat sales, and the balance reported higher sales. Reasons for weakness were varied. The outlook was generally positive but cautious.
Construction of new homes and nonresidential structures also continued to grow at modest to moderate rates, as did sales of existing homes; nonresidential leasing picked up a bit. Lending volume trends tended to mirror (and support) the general activity of the economy.
Consumer spending softened with many districts noting little or no change in non-auto retail sales, while auto sales have edged down from last year's record highs in several Districts; tourism activity has continued to keep pace with the general economy. Agricultural conditions remained mixed with some regions negatively affected by unusually wet weather. Most energy sectors tended to modestly improve.
On balance, pricing pressures were little changed from the prior report, with most districts reporting modest increases. Rapidly rising costs for lumber, steel, and other commodities tended to push input costs higher for some manufacturers and the construction sector. In contrast, some districts noted falling prices for certain final goods, including groceries, apparel, and autos. Energy prices and farm prices were mixed across products and among districts. Low inventories of for-sale homes were pushing house prices higher in many markets.
Labor markets continued to tighten, with most districts citing shortages across a broadening range of occupations and regions. Despite supply constraints impeding the ability of firms to attract and retain qualified workers, most districts reported that employment continued to grow at a modest to moderate pace. Similarly, most firms across the districts noted little change to the recent trend of modest to moderate wage growth, although many firms reported offering higher wages to attract workers where shortages were most severe. A manufacturing firm in the Chicago district reported attracting better applicants and improving retention for its unskilled workforce by raising wages 10 percent.
