CFA Society Singapore
(Oct 20): The US economy maintained a steady growth pace between late August and early October, as a tight labour market with nascent wage pressures contributed to a “mostly positive” outlook, a report from the 12 Federal Reserve districts showed.
“Most districts indicated a modest or moderate pace of expansion,” according to the Fed’s latest Beige Book, an economic survey by reserve banks. “Outlooks were mostly positive, with growth expected to continue at a slight to moderate pace in several districts.”
The job market “remained tight” with modest employment and wage growth, according to the report released Wednesday in Washington. In the San Francisco district, some small business owners said they needed to bring back health-care benefits to attract applicants.
“Wage growth held fairly steady at modest levels, although some districts reported rising pressure for certain sectors,” the report stated. Three districts -- Dallas, Richmond and San Francisco -- noted a shortage of construction workers, which in some cases constrained building activity.
A tight labour market has yet to lift inflation to the Fed’s 2% target. The report characterised price growth generally as “mild,” as manufacturers in the Midwest reported lower prices for finished goods and the hospitality industry on the West Coast saw modest price gains.
Overall, prices increased “slightly on net,” the report said.
Housing expanded in most districts, and “contacts in a few districts expressed optimism about future growth,” the Beige Book said. Even so, home inventories were reported to be low enough to restrain sales in some districts.
The oil and gas sector showed signs of stabilising, and Dallas Fed energy business contacts expect 2017 to be a better year, the report said.
Commercial real-estate contacts in a few districts expressed concern about economic uncertainty surrounding the Nov 8 US presidential election.
The Beige Book, published eight times a year, summarised comments received from business contacts around the country. It was prepared by the Dallas Fed based on information collected on or before Oct 7.
The Fed’s policy-setting panel next meets Nov 1-2. Investors saw about a 17% probability of an interest-rate increase at that meeting ahead of the report, according to pricing in federal fund futures contracts, and more than a 60% chance that they’ll increase rates by their Dec. 13-14 meeting.
Fed officials are assessing progress on their mandate for maximum employment and low inflation as they weigh whether to increase rates. At 5%, the jobless rate is near the level most officials view as consistent with full employment. Inflation is showing signs of life after missing the Fed’s target for more than four years.