The Fed's October Beige Book shows growth slowing in most districts while price pressures spread. Three districts reported robust price growth, up from one in August. Higher oil prices appeared in every district report.
The Federal Reserve's October Beige Book describes an economy losing momentum as three districts reported robust price growth, eight moderate and one modest. In August, only one district reported robust price growth.
Growth fades outside manufacturing
Two districts reported moderate growth, three modest, four slight and three no change. In August, 10 grew and two were unchanged. The national summary also dropped its headline characterization of activity entirely.
Manufacturing carries the load. Dallas posted a sharp pickup, with continued strength in data centers, power generation and defense. Philadelphia and New York slowed to slight growth from modest, while Chicago slipped to flat.
Consumers hold back
Most districts reported little or no change in consumer spending, and more than half said high-income households were driving it. San Francisco said pressure on lower-income families had spread to middle-income households. In Cleveland, a record 87% of surveyed nonprofits said their clients' finances deteriorated.
Employment was little changed: three districts saw modest gains, five slight and four no change. Boston staffing contacts said raises are lagging inflation.
Oil and repricing push prices higher
Four districts said the pace of price increases picked up. Higher oil prices showed up in every district report, with diesel the most commonly cited cost. Firms expect further increases as hedges and fixed contracts expire and get repriced.
Consumer-facing firms still can't pass costs through, so margins are getting squeezed. Higher rates emerged as a new theme, and Dallas bankers turned pessimistic, citing the Mideast conflict, inflation and the increase in the fed funds rate.
The FOMC meets Oct. 27-28, and investingLive says the report adds to the case for a rate hike alongside the day's CPI release.
Source: investingLive
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