30 November 2016

No Sign of Euphoria > Federal Reserve Beige Book Report November 2016

Fed Says U.S. Economy Continued to Expand Across Most Regions
The U.S. economy continued to expand from early October through mid-November with little inflation as retail sales, real estate markets and business service firms saw rising activity, a Federal Reserve survey showed.
The central bank’s Beige Book economic report, which was based on information collected on or before Nov. 18 by regional Fed banks, said “outlooks were mainly positive” with half of the 12 districts “expecting moderate growth.”
“A tightening in labor market conditions was reported by seven districts, with modest employment growth on balance,” according to the Beige Book, released Wednesday in Washington. “Districts noted slight upward pressure on overall prices.”

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Published on Nov 30, 2016
Fed’s Beige Book reveals no sign of postelection euphoria

There was no sign of any postelection euphoria in the Federal Reserve’s latest survey of current economic conditions released Wednesday.

The Fed survey, known as the beige book, is a collection of anecdotes from business contacts in the Fed’s 12 regional districts. This report was based on comments collected by Nov. 18.

Markets DJIA, +0.01% have jumped and consumer confidence has surged in the wake of the election, but the beige book contains little evidence of any actual impact on the economy.

Read: Consumer confidence jumps to highest level since 2007

Retail sales remained mixed, the report said. Sales were higher for apparel and furniture, but car sales were down in “most” of the Fed’s districts, while used cars were becoming a more popular option.

Election “jitters” were blamed for housing-market uncertainty in the Cleveland district, a decline in auto sales in the Richmond and St. Louis, and for slower growth in health-care services in San Francisco.

One bit of good news in the report was scattered signs of rising wages.

In a majority of the Fed’s districts, staffing services reported “rising wages or difficulty filling positions without wage increases,” the survey said.

Workers and economists have been hoping to see higher wages ever since the labor market started to improve.
The job market is getting so competitive in the Chicago region that “it is getting more and more difficult to fill positions at any skill level,” the report said, citing local business contacts. Construction work was delayed because of difficulties in finding workers, it said.
There were several references to the Nov. 8 U.S. presidential election scattered throughout the regional summary. The Richmond and St. Louis district contacts said softer vehicle sales “might be attributed to uncertainty surrounding the presidential election.” Cleveland contacts reported that election “jitters” contributed to a decline in job openings and placements.

Back to Bloomberg U.S. central bankers next meet Dec. 13-14.
Futures traders have priced in a 100 percent probability of at least a quarter-point hike as the economy gets closer to the central bank’s mandate of full employment and stable prices.
The Beige Book is a collection of anecdotes and information about economic conditions gathered by the regional Fed banks in their districts. This Beige Book was written by the Federal Reserve Bank of Cleveland.
“As in the past four Beige Books, wage growth was characterized as generally modest,” the summary said. The strong dollar was cited as a “a headwind to more robust demand” for manufactured goods in a few districts.
The Chicago Fed saw “numerous reports of businesses” seeking to refinance loans ahead of future rate increases. The Cleveland said “overall capital spending” continued to decline with two firms “postponing investment decisions” until more is known about the tax policies of the next president. The Atlanta Fed reported labor shortages in nursing and construction.
The Fed’s preferred price measure, the personal consumption expenditures price index, rose 1.7 percent for the year ending October, minus food and energy. The Fed has a 2 percent target for the full index, which increased 1.4 percent. The unemployment rate in October stood at 4.9 percent.

Related content: Business Insider Nov 30, 2016

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