A new report from the Federal Reserve Bank provided a generally optimistic view of the U.S. economy during April and early May, but some signals indicated a period of slower growth in the near future.
Overall, the Fed reported modest growth in the Beige Book published Wednesday. The report, released eight times per year, offers anecdotal information on economic conditions in each of the central bank’s 12 districts. Nearly all of the districts reported growth, with some indicating modest increases in economic activity while others noted only a slight expansion.
Employment overall continued to be solid, especially for the retail, business services, technical, manufacturing and construction sectors, according to the report. However, that growth was tempered because of the tight labor market nationwide. Officials in several districts reported employers having trouble filling vacancies for high- and low-skilled positions.
That caused some upward pressure on wages across several industries, along with improved benefits to both attract and retain employees. Despite that, wage growth was relatively low given the tight labor market and improved economy.
In terms of inflation, Fed contacts in several districts reported modest increases in prices. Firms realized higher input prices, while some contacts also indicated they were experiencing higher freight expenses.
St. Louis district
Contacts in the St. Louis district had an outlook on the economy that was slightly optimistic, but weaker than at the same time last year. The district includes eastern Missouri and all or parts of Arkansas, Illinois, Indiana, Kentucky, Mississippi and Tennessee.
Wages increased within the area, with 10% of contacts reporting employment was higher or slightly higher than a year ago. The labor market continued to be tight in several industries, including transportation, construction and health care. Multiple manufacturing representatives indicated a shortage in qualified workers had become worse.
The shortage has had an impact on wages, with about 36% of contacts indicating higher or slightly higher wages than a year ago.
In terms of inflation, 34% of the St. Louis Fed’s contacts indicated higher input prices and 16% reported they increased the prices they charged to customers. However, those reporting higher labor and non-labor expenses declined for the second consecutive quarter.
On net, 57% stated they believe they would have some ability to increase prices during the next three months.
Kansas City district
The economic outlook was slightly more optimistic for contacts of the Federal Reserve Bank of Kansas City, whose district includes western Missouri and all or parts of Colorado, Kansas, Nebraska, New Mexico, Oklahoma and Wyoming. Officials reported that economic activity continued to increase slightly in April and early May, and many contacts indicated they expected growth to increase in the future.
The labor market in the district continued to grow, with employment and employee hours increasing slightly. The growth was broad based, with retail trade, wholesale trade, transportation, services, real estate, tourism and hotels, as well as restaurants all reporting steady to increasing employment. Auto sales and the health sector reported declines in employment.
The labor market remained tight in this district as well, with reported shortages not only in traditionally blue-collar occupations such as truck drivers, construction workers and retail and restaurant sectors, but also for physicians, pilots, accountants and information technology professionals.
There was some presence of inflation. Contacts indicated modest increases to input prices and slight increases to selling prices. The retail sector reported strong growth in input prices and moderate increases in selling prices. Those in the transportation industry indicated moderate increases to both input and selling prices. Representatives from the construction industry indicated lower prices but expected them to increase in the future.