Beige book: economy growing modestly with slight price pressures

ECONOMIC ACTIVITY in the United State is expanding, but overall the 12 districts of the Federal Reserve believe the pace is modest, with some softening of consumer demand, according to the latest edition of the Fed's Beige Book.  / BLOOMBERG NEWS FILE PHOTO/BRENT LEWIN
ECONOMIC ACTIVITY in the United State is expanding, but overall the 12 districts of the Federal Reserve believe the pace is modest, with some softening of consumer demand, according to the latest edition of the Fed's Beige Book. / BLOOMBERG NEWS FILE PHOTO/BRENT LEWIN

WASHINGTON – The U.S. economy expanded at a modest pace since mid-May amid “slight” price pressures and some softening in consumer spending, a report from the Federal Reserve’s 12 districts showed.

“The outlook was generally positive across broad segments of the economy including retail sales, manufacturing and real estate,” according to the Fed’s latest Beige Book, an economic survey by reserve banks published eight times a year. “Districts reporting on overall growth expect it to remain modest.”

The Fed’s policy-setting panel next meets July 26-27. Investors see a less than 5 percent probability of a rate increase at that meeting, according to pricing in federal fund futures contracts, as officials weigh global risks after the United Kingdom voted June 23 to leave the European Union.

The Beige Book, released Wednesday in Washington, summarizes comments received from business contacts around the country. It was based on information collected on or before July 1.

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Fed officials are weighing progress on their mandate for maximum employment and hope that higher wages will feed through into an uptick in inflation as the economy advances.

Skilled labor

“Labor market conditions remained stable as employment continued to grow modestly since the previous report, and wage pressures remained modest to moderate,” the Fed said. Several districts reported “strong demand for skilled labor” and businesses faced challenges in filling positions in information technology, biotechnology and health care services.

Labor Department data released earlier this month showed that payrolls rose 287,000 in June, rebounding from a weak performance in May when just 11,000 jobs were added.

The Beige Book also showed scant inflation, though most districts reported upward pressure in input prices.

The Atlanta Fed’s GDPNow indicator estimates that the economy grew 2.3 percent from April through June, which would make it the strongest three-month period since the second quarter of last year.

While the Fed said its contacts saw “signs of softening” in consumer spending, the outlook in the months ahead “was predominantly optimistic” across most of the United States.

The Fed said manufacturing activity was “mixed” while residential real estate activity “continued to strengthen” since the previous report.

Rhode Island view

While the overall view for New England (District 1), compiled by the Federal Reserve Bank of Boston, was for modest growth, the Rhode Island residential real estate market was bullish, with expectations that there will be no summer slowdown, according to the people contacted.

“Those in Massachusetts, Vermont and Rhode Island all expressed a positive outlook, primarily attributable to strong buyer demand,” according to the report.

The commercial real estate market was seen as active at a moderate pace in Providence and Portland, with a slight slowdown in the hot Boston market. Only Hartford was seen weakening in the period.

While the number of contacts responding was small across the board, according to the report, manufacturers, and software and IT services enterprises all were optimistic about demand in the future. A manufacturer of semiconductors in the region reported challenges in hiring engineers and machinists.

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