EconoFACTS

April 17, 2024 | 15:03

Beige Book Portrays An Economy That Is Still Expanding

The April Beige Book paints an economy that is growing but at a somewhat slower pace. U.S. economic activity “expanded slightly, on balance, since late February” with 10 of the 12 Districts reporting “either slight or modest economic growth”, while the remaining two reported “no changes in activity”. Consumer spending “barely increased at all”, although reports varied by district. Several districts referenced “weakness in discretionary spending, as consumers’ price sensitivity remained elevated”. Tourism activity “increased modestly, on average, but reports varied widely”. Manufacturing activity “declined slightly” with only three Districts reporting an expanding factory sector. The economic outlook across districts was “cautiously optimistic, on balance”.

Labor Market

Employment “rose at a slight pace overall”, with nine Districts reporting “very slow to modest increases”, and the remaining three Districts reporting “no changes in employment”. The majority of Districts noted “increases in labor supply and in the quality of job applicants”. In spite of the increased labor supply, many Districts depicted “persistent shortages of qualified applicants for certain positions, including machinists, trades workers, and hospitality workers”. Wages rose at a “moderate pace” in eight Districts, with the remaining four noting only “slight to modest wage increases”. Multiple Districts stated that annual wage growth rates had “recently returned to their historical averages”.

Prices

Price hikes were “modest, on average, running at about the same pace as in the last report”. Changes in raw materials prices “were mixed, but six Districts noted moderate increases in energy prices”. Several Districts reported “sharp increases in insurance rates, for both businesses and homeowners”. A frequent remark was that “firms’ ability to pass cost increases on to consumers had weakened considerably in recent months, resulting in smaller profit margins”. On net, contacts anticipated that inflation would “hold steady at a slow pace moving forward”.

Bottom line: The description of U.S. economic activity expanding slightly in the April Beige Book is consistent with our forecast of real GDP growth cooling somewhat this year, especially as consumers pull back on discretionary spending amid elevated interest rates and slower job growth.