Economist's Insights

Fed’s Beige Book Showed Steady Economic Activity, Strengthening Price Pressures

Nov 29, 2017

The latest Beige Book, released ahead of the Fed’s meeting in two weeks’ time, noted that anecdotal evidence across the 12 Fed Districts showed activity continued to increase at a “modest to moderate pace” and highlighted a “slight improvement in the outlook.” Fed contacts also said they were “generally optimistic” about holiday sales, and rightfully so based on early analyses of Black Friday spending. Housing “remained constrained” and “manufacturing activity expanded” moderately. The assessment of the labor market was essentially unchanged with widespread tightness in the labor market resulting in “modest to moderate” wage growth, even as finding qualified workers remained a concern across multiple Districts. A potential partial explanation for the pace of wage gains was the fact that many employers reported leveraging “signing bonuses and other nonwage benefits to retain or attract employees.” As to broader inflation, pricing pressures had picked up with “modest to moderate growth in selling prices and moderate increases in non-labor input costs”. One notable change in November was that “in many cases” increases in manufacturing input costs were pushed down to the consumer whereas they were absorbed by producers in October. Nothing in the anecdotal evidence should dissuade the Fed from hiking in December which seems to be the majority’s desire.