Fed’s Beige Book Reports Continued Modest Growth

The U.S. economy is entering 2020 on solid footing, having kept up its modest expansion in the final six weeks of 2019, the Federal Reserve said.

Tight labor markets, slow price increases and a solid holiday season — particularly among online shoppers — offset weakness in manufacturing, the central bank said in its periodic report of anecdotes from businesses around the country known as the “beige book.” Trade uncertainty and tariffs continued to weigh on some businesses, the report said.

“Expectations in the near-term outlook remained modestly favorable across the nation,” the Fed said.

The report suggests businesses are confident in their prospects. Banks reported loan volumes were steady or growing moderately. Housing construction was expanding. Vehicle scales were showing moderate growth. And agriculture and energy firms reported little change over the period.

Manufacturing remained weakened by trade uncertainties with some areas reporting job cuts or hiring slowdowns. Some manufacturers also reported declining prices for their products.

There was some hope that recent trade agreements could bode well for exporters. In the Dallas region, some chemical plants said the so-called “Phase One” trade agreement with China “would remove tariffs from some forms of plastic but leave tariffs in place on many other products.”

Agricultural producers in the region were also encouraged by the signing of a new North American trade agreement.

Other businesses, however, remained wary of tariffs. One wine dealer in the Philadelphia Region stocked up 35,000 cases of European wines to beat proposed levies in the coming weeks.

Inflation pressures remained modest overall, the report said. “A number of districts reported that retail selling prices rose at a slightly faster, but still subdued, pace,” the Fed said. Some restaurants also said they were feeling pressure from rising food prices.

Trends in residential real estate varied. In the Boston region, a severe shortage of housing inventory weighed on sales. “Many potential sellers are concerned about having nothing to buy after a sale because inventories are so low.”

In New York City, by contrast, prices are weakening because of oversupply.

“The steepest declines have continued to be at the high end of the market,” the report said. “The inventory of existing homes has risen further, reaching a fairly high levels in Manhattan and moderate levels in Brooklyn and Queens.”
Source: Dow Jones