Economic activity in most of the Federal Reserve Bank’s 12 districts expanded at a modest or moderate pace in July and August before Hurricane Harvey made landfall on the Gulf Coast, according to the Fed’s latest Beige Book report.
Economic conditions in the Federal Reserve’s Eighth District, which has its headquarters in St. Louis, and the Fed’s 10th District, which is based in Kansas City, were not directly impacted by the hurricane, but the report said is was too soon to see some indirect impacts.
The Fed compiles the Beige Book, which is published eight times per year, through reports from bank and branch directors, plus interviews and online questionnaires of businesses, community contacts, economists and market experts. Although the information included in this recently published report was primarily collected before Hurricane Harvey, some districts received preliminary information from business contacts regarding the impact of the storm. The report did not account for the effects of Hurricane Irma, which made landfall in the U.S. days after the report’s publication.
Most of the 12 districts reported that firms expressed positive near-term outlooks as a result of expansion in both consumer and capital spending; however, that was before the hurricane made landfall.
In the Dallas and Atlanta districts, many businesses and organizations closed or stopped production temporarily due to flooding. In the Southeastern U.S., gasoline shortages resulted from pipeline disruptions and spot freight prices jumped after the storm.
In spite of the storm, employment growth slowed, ranging from a slight to a modest rate in most districts. There were reports of worker shortages in numerous industries, most notably in manufacturing and construction.
In the Eighth District, which includes eastern Missouri and all or parts of Arkansas, Indiana, Kentucky, Mississippi and Tennessee, economic activity continued to improve at a modest pace. The optimistic outlook for the remainder of the year has been unchanged since mid-May.
Most sectors showed moderate growth. Although employment has increased modestly since May, construction and manufacturing contacts continued to report difficulties finding the necessary workers. The district reported modest to moderate wage growth to retain and attract employees.
Multiple auto dealers across the district reported a decrease in sales indicating a shift in demand toward low-end vehicles.
District manufactures, non-financial service providers and bankers continued to report modest increases since the previous report. Agricultural conditions were mixed as early-season flooding pushed acreage down 25 percent from last year. The lost acreage will hurt rice farmers this year, but some of these farmers are optimistic that a recent trade agreement with China will boost profits.
In the 10th District, which includes the western part of Missouri and all or parts of Colorado, Kansas, Nebraska, New Mexico, Oklahoma and Wyoming, economic activity increased modestly, and most sectors expected moderate growth in future months.
Professional, high-tech and wholesale trade firms reported a strong increase in sales, where employment increases were reported. Despite the weakening of agricultural conditions, most sectors experienced a modest or moderate improvement.
Agricultural, transportation and tourism conditions were expected to decline further in coming months. Yet for other sectors, expectations for future activities remained positive.
Survey correspondents in most sectors reported moderate wage growth, and expectations in the coming months were for strong wage growth.