Fed Beige Book: Economic Activity 'Continued Expanding' Across Most Districts -- Update
September 02 2015 - 02:44PM
Dow Jones News
By Josh Mitchell And Jeffrey Sparshott
WASHINGTON--A tightening labor market pushed up workers' wages
in pockets of the U.S. this summer, the Federal Reserve said
Wednesday, but slowing growth in Asia threatened to hit American
factories.
The Fed's beige book survey portrayed the U.S. economy overall
as continuing to expand at a moderate or modest pace in July
through mid-August. It suggested certain areas of the economy are
relatively strong, including the jobs market, the housing market
and construction. But it also pointed to growing obstacles, such as
the strong dollar and slowing growth in China.
While the beige book offers only anecdotal accounts, it supports
the notion that the economy's expansion remained on track in the
third quarter after growing at a solid 3.7% annual pace in the
spring. It comes before the central bank's Sept. 16-17 policy
meeting, at which officials are expected to debate whether to raise
short-term interest rates.
Reports from the 12 Fed districts across the U.S. "indicate
economic activity continued expanding across most regions and
sectors during the reporting period" that covered the start of the
third quarter, the Fed said. Eleven districts reported modest or
moderate growth, while Cleveland offered a less optimistic
assessment.
Most notably, the Fed pointed to wage pressures in some regions
that it attributed to steady hiring and falling unemployment.
Most districts reported "relatively stable wages," with "slight
to modest" increases at the start of the third quarter compared
with the prior six weeks. "However, several Districts reported
increasing wage pressures caused by labor market tightening," it
continued.
The St. Louis Fed, for example, reported that three-fifths of
companies it polled had raised wages in the prior three months. The
New York Fed cited "increasing wage pressure on starting salaries."
Cleveland reported "intensifying wage pressure" in industries
including construction, retail and transportation.
The report also pointed to strength in real estate. "Existing
home sales and residential leasing widely improved, with home
prices moving up in most areas," it said. Commercial real estate
was also "mostly positive."
But the assessment of U.S. factories, which are battling a
strong dollar, depressed oil prices and slowing growth in Asia, was
mixed.
The Fed said reports on the sector were "generally positive,"
with 10 of 12 districts reporting stability or growth. But it added
that several factors are "damping demand." Falling energy prices
have curbed demand for machinery. Meanwhile, the strong dollar and
slowing economic growth in Asia pushed down the price of imports
such as steel, making U.S. goods less competitive.
The U.S. economy grew at a 3.7% annual rate in the second
quarter. Private economists are forecasting that it will grow at a
roughly 2% to 3% rate in the current quarter.
The Fed is scrutinizing reports on the economy as it debates
when and how quickly to raise short-term interest rates, which have
been pinned near zero since the recession. The central bank has
signaled it could move as early as its Sept. 16-17 meeting, but it
has said it wants assurance the economy is continuing to advance
and that inflation is slowly moving toward its target of 2%
yearly.
The beige book said "both input and output prices remained
stable in most districts."
Write to Josh Mitchell at joshua.mitchell@wsj.com and Jeffrey
Sparshott at jeffrey.sparshott@wsj.com
(END) Dow Jones Newswires
September 02, 2015 14:29 ET (18:29 GMT)
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