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Beige Book: National Summary

October 18, 2017

This report was prepared at the Federal Reserve Bank of Minneapolis based on information collected on or before October 6, 2017. This document summarizes comments received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.

Overall Economic Activity
Reports from all 12 Federal Reserve Districts indicated that economic activity increased in September through early October, with the pace of growth split between modest and moderate. The Richmond, Atlanta, and Dallas Districts reported major disruptions from Hurricanes Harvey and Irma in some areas and sectors, including transportation, energy, and agriculture. Manufacturing activity and nonfinancial services expanded modestly to moderately in most Districts. Retail spending rose slowly, while vehicle sales and tourism increased in most Districts. Residential construction continued to increase, and growth in commercial construction was up slightly on balance. Low home inventory levels continued to constrain residential sales in many areas, while nonresidential real estate activity increased slightly overall. Loan demand was generally stable to modestly higher. Growth in the energy sector eased slightly. Agricultural conditions were mixed; while some regions were reporting better-than-expected harvests, low commodity prices continued to weigh down farm incomes.

Employment and Wages
Employment growth was modest on balance, with most Districts reporting flat to moderate increases. Labor markets were widely described as tight. Many Districts noted that employers were having difficulty finding qualified workers, particularly in construction, transportation, skilled manufacturing, and some health care and service positions. These shortages were also restraining business growth. Firms in several Districts reported that scarcity of labor, particularly related to construction, would be exacerbated by hurricane recovery efforts. Despite widespread labor tightness, the majority of Districts reported only modest to moderate wage pressures. However, some Districts reported stronger wage pressures in certain sectors, including transportation and construction. Growing use of sign-on bonuses, overtime, and other nonwage efforts to attract and retain workers were also reported.

Prices
Price pressures remained modest since the previous report. Several Districts noted increased manufacturing input costs, but in most cases these weren't passed through to selling prices. Retail prices generally increased slightly. Transportation, energy, and construction materials prices increased more rapidly, with some Districts citing effects from hurricanes.

Highlights by Federal Reserve District

Boston
Economic activity expanded at a modest to moderate pace since August, according to contacts. Respondents in manufacturing, retailing, and software and IT services said revenues continued to increase year over year. Commercial and residential real estate market conditions were mostly unchanged. Looking forward, business contacts remained upbeat about the outlook.

New York
The District's economy has continued to expand at a moderate pace since the last report, while labor markets have been tight. Input prices continued to rise moderately, while selling prices rose more modestly. Housing markets have strengthened somewhat, on balance, but commercial real estate markets have been flat.

Philadelphia
Overall, economic activity continued at a modest pace of growth. Most sectors, including manufacturing and nonfinancial services, continued to grow modestly. Non-auto retail sales showed slight improvement, and auto sales grew modestly after declining in the previous period. On balance, employment changed little, while wages and prices continued to grow modestly.

Cleveland
Business activity increased from that of the previous reporting period, but the overall pace of growth was moderate. After slowing during the summer months, hiring picked up across industries. Input price pressures outpaced selling price pressures. Retail store spending was flat; auto sales rose. Nonresidential construction remains healthy, but there are signs the industry may be slowing.

Richmond
The economy expanded moderately. Manufacturing and port activity picked up, retail sales rose, and tourism remained strong. Commercial real estate leasing and lending activity increased modestly. Labor markets strengthened and wage pressures broadened. Prices rose moderately, partially due to supply chain disruptions from the hurricanes.

Atlanta
Economic conditions improved modestly since the last report. Tightness in the labor market continued with few reports of wage pressures. Input cost pressures were subdued. Non-auto retailers cited steady sales growth. Tourism, energy, and agriculture were impacted by Hurricane Irma. Home sales and prices increased. New orders and production rose. Credit was available to most borrowers.

Chicago
Growth continued at a modest rate. Employment, business spending, and manufacturing increased modestly, while consumer spending increased slightly. Construction and real estate activity was little changed, as were financial sector conditions. Wages and prices rose modestly. Contacts expected the District's corn and soybean harvests to be close to trend.

St. Louis
Economic conditions have continued to improve at a modest pace since our previous report. The District continues to see relatively stronger growth in both manufacturing and banking sectors, although growth in both sectors has decelerated somewhat since the beginning of the year.

Minneapolis
Economic activity grew modestly. Despite employer demand, job growth suffered from a lack of available workers. Tourism saw growth, but consumer spending overall showed some signs of weakness. Home construction rose, while home sales fell due to tight inventories. Commercial construction continued to lag. Manufacturing and mining activity picked up.

Kansas City
Economic activity in the Tenth District continued to expand modestly, and expectations for future growth were positive in most sectors. Retail sales increased modestly, the manufacturing sector expanded moderately, and transportation and wholesale trade firms noted strong sales. However, growth in the energy sector eased, and the agricultural sector continued to soften.

Dallas
Economic activity grew moderately. The impact from Hurricane Harvey varied by location and industry, and most contacts do not expect significant long-term disruption. The manufacturing sector exhibited notable strength with stronger output, increased hiring, and a pickup in price inflation. Auto sales surged in response to the loss of storm-damaged vehicles, and labor market shortages persisted and may become more acute as hurricane recovery continues.

San Francisco
Economic activity continued to expand at a moderate pace. Overall price inflation was flat and remained low, while upward wage pressures strengthened somewhat and conditions in the labor market tightened further. Sales of retail goods picked up, and growth in the consumer and business services sectors remained strong. Conditions in the manufacturing sector improved. Activity in the residential real estate market was strong.