The headline may look like an upgrade -- that economic growth is moderate and not modest-to-moderate as the last Beige Book in July -- but the details look soft Consumer spending gets no better score than "modest" while manufacturing, where some data have been very strong, is described as only "moderate". Home construction is said to be mixed which is better than home sales where "soft" is the verdict. Commercial real estate is also no better than mixed, and agriculture gets an outright "weak" rating. Strength does appear in the report in transportation and also tourism which are expanding.
But the real strength comes in employment where gains will help confirm expectations for an incremental rate hike at the month-end FOMC. The report describes labor markets as "tight throughout the country" with both high skill and low skill labor in short supply. Employment growth itself, held back by "widespread shortages" of applicants in most districts, is no stronger than modest or moderate. Six of the 12 districts cited instances in which labor shortages are holding back business expansion.
Wage growth is also no stronger than modest or moderate though "steep wage hikes" for construction workers are cited. Like wages, prices of final goods and services are said to be rising at a modest to moderate rate though the report does note "some signs" of deceleration. But at the base on the supply chain, "widespread" increases in input costs are cited especially for construction materials and freight transportation. Tariffs are said to raising input costs for manufacturers.
And closing in a hawkish sounding note and a reminder that the Fed is approaching another rate hike, the report notes efforts among businesses to pass through higher costs to customers with a few districts noting some increase in inflation expectations.
By district, eight of the districts reported a moderate pace of expansion with Dallas reporting Dallas brisk growth and Philadelphia, St. Louis, and Kansas City indicating below average growth.
Cut-off date was August 31 for today's report which was compiled by the New York Fed for the September 25 & 26 FOMC.