The Fed's Beige book for April has been released:
Below are the highlights of the overall economic activity report:
- Economic Expansion: Activity expanded slightly overall since late February, with 10 out of 12 Districts reporting slight to modest growth.
- Consumer Spending: There was a minimal overall increase in consumer spending, though the results were mixed across different districts and categories.
- Discretionary Spending Weakness: Several reports highlighted a weakness in discretionary spending due to high price sensitivity among consumers.
- Auto Spending: Improved inventories and dealer incentives notably boosted auto spending in some Districts, while sales remained sluggish elsewhere.
- Tourism: Tourism activity modestly increased on average, though the extent varied significantly across reports.
- Manufacturing: There was a slight decline in manufacturing activity, with only three Districts reporting growth.
- Nonfinancial Services and Bank Lending: Nonfinancial services saw slight increases on average, while bank lending was roughly flat.
- Construction and Real Estate: Residential construction and home sales showed some improvement on average, whereas nonresidential construction was flat and commercial real estate leasing declined slightly.
- Economic Outlook: Contacts were cautiously optimistic about the future, on balance.
Below are the summarized highlights of employment from the report:
- Overall Employment Growth: Employment grew at a slight pace, with nine Districts experiencing very slow to modest increases, while the remaining three reported no changes.
- Labor Supply and Quality: Most Districts observed increases in labor supply and the quality of job applicants, improving the overall employment landscape.
- Employee Retention and Reductions: Several Districts noted improved employee retention, though some also reported staff reductions at certain firms.
- Persistent Shortages: Many Districts faced ongoing shortages of qualified applicants for specific roles such as machinists, trades workers, and hospitality workers.
- Wage Growth: Wages grew moderately in eight Districts, while the others saw only slight to modest increases. It was noted that annual wage growth rates have returned to historical averages in multiple districts.
- Future Expectations: The general expectation is that labor demand and supply will remain relatively stable, with modest job gains continuing and wage growth moderating back to pre-pandemic levels.
Below are the summarized highlights regarding prices from the report:
- Modest Price Increases: Overall, price increases remained modest and consistent with the pace observed in the previous report.
- Impact of Disruptions: Despite shipping delays caused by disruptions in the Red Sea and the collapse of Baltimore’s Key Bridge, these incidents have not led to widespread price increases.
- Energy Prices: Six Districts reported moderate increases in energy prices, indicating some upward pressure in this sector.
- Insurance Rate Hikes: Contacts in several Districts observed sharp increases in insurance rates for both businesses and homeowners.
- Weaker Pricing Power: Many firms noted a significant weakening in their ability to pass on cost increases to consumers, which has led to reduced profit margins.
- Strain on Nonprofits: Inflation has also strained nonprofit entities, with some reporting service reductions as a result.
- Inflation Expectations: On balance, contacts expect inflation to remain steady at a slow pace, although some manufacturers in a few Districts see potential upside risks to near-term inflation, both in input and output prices.
Upon reviewing the the anecdotal review above, the "book" seems to paint a less robust view of the economy, employment, and prices than perhaps the markets interpretation (in my first glance). Economic activity expanded "slightly". Employment grew at a "slight" pace. Overall price increases remained "modest" and that "many firms" noted a "significant weakening in their ability to pass on cost increases to consumers".
For the full report including a breakdown by Federal Reserve districts, can be found HERE.