The moderate-to-modest theme for the Beige Book has been upgraded slightly, with "moderate" alone making the headline for May's edition. And moderate is the description of inflation in most of the 12 districts with modest, however, the description for some. Yet the news on wages, described as remaining modest, won't be adding urgency to what nevertheless is expected to be a rate hike at the June FOMC.
But a shortage of skilled labor at all levels does point to wage pressures at least eventually. Employment in general is in the modest-to-moderate camp in most of the districts.
In fact there is plenty of less-than-robust news in this report. Consumer spending, labeled as "soft," gets a clear downgrade with auto sales said to be flat and with other retail sales said to be "moderating somewhat." Manufacturing is said to be picking up with housing modest and nonresidential construction moderate.
Dallas was in the robust category in January's Beige Book but then fell back to the moderate grade in March and April but is now at the "solid" level for May's report. The upgrade in Dallas, however, is offset by a downgrade for St. Louis which is now in the slight growth column.
Tariffs are repeatedly cited as an inflationary risk with the report noting general uncertainty regarding trade policy especially with China. Cut-off date was May 21 for today's report which was compiled by the Cleveland Fed for the June 12 & 13 FOMC.