Federal Reserve: U.S. Growth Continues at Moderate Pace

Manufacturing and construction activity both continue to increase.

Economic activity increased in September through early October, according to the Beige Book, as published by Board of Governors of the Federal Reserve System. Reports from 12 Federal Reserve Districts indicated a pace of growth split between modest and moderate.

The Richmond, Atlanta and Dallas districts reported major disruptions from Hurricanes Harvey and Irma in some areas and sectors, including transportation, energy and agriculture. Manufacturing activity and nonfinancial services expanded modestly to moderately in most districts. Retail spending rose slowly, while vehicle sales and tourism increased in most districts.

Residential construction continued to increase, and growth in commercial construction was up slightly on balance. Low home inventory levels continued to constrain residential sales in many areas, while nonresidential real estate activity increased slightly overall. Loan demand was generally stable to modestly higher. Growth in the energy sector eased slightly. Agricultural conditions were mixed; while some regions were reporting better-than-expected harvests, low commodity prices continued to weigh down farm incomes.

Employment growth was modest on balance, with most districts reporting flat to moderate increases. Labor markets were widely described as tight. Many districts noted that employers were having difficulty finding qualified workers, particularly in construction, transportation, skilled manufacturing, and some health care and service positions. These shortages were also restraining business growth. Firms in several districts reported that scarcity of labor, particularly related to construction, would be exacerbated by hurricane-recovery efforts. Despite widespread labor tightness, the majority of districts reported only modest to moderate wage pressures. However, some districts reported stronger wage pressures in certain sectors, including transportation and construction. Growing use of sign-on bonuses, overtime and other nonwage efforts to attract and retain workers were also reported.

Price pressures remained modest since the previous report. Several districts noted increased manufacturing input costs, but in most cases these weren't passed through to selling prices. Retail prices generally increased slightly. Transportation, energy, and construction materials prices increased more rapidly, with some districts citing effects from hurricanes.

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