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Financial Bulletin

Fed's Beige Book: US economic activity rose slightly at the start of the year, and won't improve much in coming months

Release Time:2023-03-09

On Wednesday March 8th the Federal Reserve released its Beige Book for the second time this year, a survey of the Fed's 12 regional economies through February 27th.

The Beige Book said overall U.S. economic activity increased slightly in early 2023.

Of the nation's 12 districts, six reported little or no change in activity since the last report (released Jan. 18), while the other six indicated that activity expanded at a moderate pace.

Looking ahead, respondents do not expect economic conditions to improve much in the coming months amid heightened uncertainty.

Supply chain woes are easing, and high inflation and interest rates remain constraining consumption

Supply chain disruptions across the United States continued to ease, the Beige Book said.

On the consumption side, consumer spending remained stable overall, but some districts reported moderate to strong growth in retail sales in what is usually a flat period. Nationally, auto sales were little changed, but inventory levels continued to improve. Data from several regions showed that high inflation and interest rates continued to reduce consumers' disposable income and purchasing power, and raised concerns about rising credit card debt. Travel and tourism activity remained fairly strong in most regions.

Manufacturing activity stabilized after a period of contraction.

While the housing market remains depressed and industry is constrained by very low inventories, some areas along the eastern seaboard have seen an unexpected uptick in activity beyond seasonal norms. Commercial real estate activity was stable and the industrial real estate market grew, but the office market continued to weaken.

Demand for nonfinancial services was generally stable across the country, but picked up in some areas.

Nationwide, demand for loans has fallen, credit standards have tightened and delinquency rates have edged up.

Energy activity was flat to slightly down, and agricultural conditions were mixed.

The labor market remains solid and wage growth will slow further

On the labor market, the Beige Book said labor market conditions remain solid.

The Beige Book said employment continued to grow at a moderate pace in most regions, despite hiring freezes at some companies and scattered reports of layoffs.

Labor supply has improved slightly, but finding workers with the required skills or experience remains challenging. Data from some regions show that the lack of available childcare continues to deter Labour from entering the market.

While the labor market remains tight overall, some regions note that companies are becoming less flexible with employees and are starting to reduce remote working options.

Wages generally grew at a moderate pace, with data from some districts suggesting wage pressures eased. The Fed expects wage growth to slow further this year.

Inflationary pressures remain widespread and price increases are expected to continue to moderate

Although price growth has slowed in many regions, inflationary pressures remain widespread.

Some regions reported further increases in input costs, particularly energy and raw materials, although freight and transport costs eased.

Data from some regions show that companies are finding it harder to pass on cost increases to consumers.

Selling prices rose modestly in most regions, with a deceleration in some.

Prices overall were flat or slightly down, while rents were reported to be stable or rising. Still, home prices and rents remain high, adding to ongoing concerns about housing affordability.

Looking ahead, respondents expect price increases to continue to slow this year.

Risk warning and disclaimer clause

The market is risky and investment needs to be cautious. This article does not constitute personal investment advice and does not take into account the particular investment objectives, financial situation or needs of individual users. Users should consider whether any opinion, opinion or conclusion in this article fits their particular situation. Invest accordingly at your own risk.

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