The Federal Reserve Board said that “national economic activity continued to expand at a modest to moderate pace” in its latest Beige Book. With that said, eight Fed Districts noting “similar growth rates” while four others experienced a bit slower growth. Those four Districts were the Chicago, Kansas City, Philadelphia, and Richmond Federal Reserve Bank regions. In terms of manufacturing activity, the data reflected a sector that was expanding overall. Automotive and aerospace were bright spots, with positive stories for high-tech, energy, heavy equipment, and steel. Yet, the demand for fabricated metals and construction materials was mixed.
Government uncertainties were mentioned several times in the Beige Book. Examples included the following comments:
- “Contacts across Districts generally remained cautiously optimistic in their outlook for future economic activity, although many also noted an increase in uncertainty due largely to the federal government shutdown and debt ceiling debate”
- “Several Districts reported that contacts were cautious to expand payrolls, citing uncertainty surrounding the implementation of the Affordable Care Act and fiscal policy more generally.”
- “While there was little immediate disruption from the federal government shutdown, [manufacturing] contacts were worried about the potential impact if the closing became prolonged.”
Hiring was growing modestly overall, with employment growth in the manufacturing sector somewhat spotty. Specifically, the report says the following:
In manufacturing, Boston indicated that hiring primarily was for replacement or to fill key needs, New York noted slower job growth, and Chicago reported that manufacturers were cutting back on overtime. Dallas cited scattered reports of hiring in high-tech, fabricated metals, and food manufacturing.
Overall wage and pricing pressures were somewhat minimal. However, there were some upward wage pressures for some highly-skilled employees, including those in the manufacturing sector. Meanwhile, at least two Districts noted that manufacturing “capital outlays were primarily for productivity enhancing investments.”
In other analysis, consumer spending continued to grow modestly, with motor vehicle sales being one of the bright spots. Retails were mostly upbeat about the upcoming Christmas season. Construction spending continued to improve, but a “number of Districts reported concerns from homebuilders and realtors over rising mortgage rates.” At the same time, nonresidential construction activity was more varied, but up on balance.
Chad Moutray is the chief economist, National Association of Manufacturers.
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