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Beige Book: National Summary

September 12, 2018

This report was prepared at the Federal Reserve Bank of New York based on information collected on or before August 31, 2018. 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 the Federal Reserve Districts suggested that the economy expanded at a moderate pace through the end of August. Dallas reported relatively brisk growth, while Philadelphia, St. Louis, and Kansas City indicated somewhat below average growth. Consumer spending continued to grow at a modest pace since the last report, and tourism activity expanded, to varying degrees, across the nation. Manufacturing activity grew at a moderate rate in most Districts, though St. Louis described business as little changed and Richmond reported a decline in activity. Transportation activity expanded, with a few Districts characterizing growth as robust. Home construction activity was mixed but up modestly, on balance. However, home sales were somewhat softer, on balance--in some cases due to reduced demand, in others due more to low inventories. Commercial real estate construction was also mixed, while both sales and leasing activity expanded modestly. Lending activity grew throughout the nation. Some Districts noted weakness in agricultural conditions. Businesses generally remained optimistic about the near-term outlook, though most Districts noted concern and uncertainty about trade tensions--particularly though not only among manufacturers. A number of Districts noted that such concerns had prompted some businesses to scale back or postpone capital investment.

Employment and Wages
Labor markets continued to be characterized as tight throughout the country, with most Districts reporting widespread shortages. While construction workers, truck drivers, engineers, and other high-skill workers remained in short supply, a number of Districts also noted shortages of lower-skill workers at restaurants, retailers, and other types of firms. Employment grew modestly or moderately across most of the nation, though Dallas noted robust job growth, while three Districts reported little change that partly reflected a dearth of applicants. Six of the twelve Districts cited instances in which labor shortages were constraining sales or delaying projects. Wage growth was mostly characterized as modest or moderate, though a number of Districts cited steep wage hikes for construction workers. Some Districts indicated that businesses were increasingly using benefits--such as vacation time, flexible schedules, and bonuses--to attract and retain workers, as well as putting more resources into training.

Prices
Prices of final goods and services continued to rise at a modest to moderate pace in most Districts, though there were some signs of a deceleration. All Districts noted fairly widespread input price pressures, particularly for construction materials and freight transportation. Tariffs were reported to be contributing to rising input costs, mainly for manufacturers. Businesses' input costs have generally been rising more rapidly than selling prices, though there have been increased efforts to pass along cost hikes to customers. A few Districts noted some increase in inflation expectations.

Highlights by Federal Reserve District

Boston
Firms reported continued expansion of business activity. Retailers, manufacturers, and staffing firms cited year-over-year increases in revenues and sales. Labor markets remained tight amid little net hiring. Contacts reported only modest increases in prices, if any. Outlooks continued to be positive.

New York
The regional economy expanded at a moderate pace, and labor markets have remained tight. Input price in-creases have remained widespread, while firms' selling prices have decelerated somewhat. Housing markets have softened, on balance, while commercial real estate markets have firmed a bit.

Philadelphia
Economic activity continued to expand at a modest pace. With tight labor markets, wages grew moderately despite incremental job growth. On balance, contacts continued to observe modest price increases but expressed growing concern for future inflation. Notably, manufacturing slowed to a modest pace of growth, and nearly two-thirds of the manufacturers reported rising prices paid.

Cleveland
The District economy grew at a moderate pace. Labor markets tightened, and wage pressures were noted broadly. Cost pressures among manufacturers and construction firms continued, especially for metals, construction materials, and transportation. Stronger confidence in the economy boosted demand in nonfinancial services and the retail sector. Construction activity weakened.

Richmond
The regional economy grew moderately in recent weeks. Port and transportation activity remained robust. Business travel and tourism was also strong throughout the Fifth District. Meanwhile, manufacturers gave mixed accounts as some firms were unable to pass along higher input prices. Labor demand strengthened, and employers continued to report difficulties finding qualified workers. Prices grew moderately, overall.

Atlanta
The Sixth District economy expanded at a moderate pace. Labor markets remained tight, and wage pressures increased for some firms. Most nonlabor input costs were stable. Retail sales improved further. On balance, the pace of nonresidential construction was flat compared with year-earlier levels, while residential construction activity was up. Manufacturing activity continued to grow.

Chicago
Growth picked up to a moderate pace. Manufacturing production and employment grew moderately, consumer and business spending increased modestly, and construction and real estate activity was up slightly. Wages and prices rose modestly, and financial conditions improved slightly. Overall crop yields appeared set to forge a new record.

St. Louis
Economic conditions improved slightly. Labor market conditions remained tight, and wage growth was modest. Manufacturers facing higher input prices reported passing those costs along to their customers. Agriculture contacts estimated that the majority of the soybean crop has not yet been priced, leaving farmers exposed to current market conditions.

Minneapolis
Ninth District economic activity expanded moderately. Employment grew strongly, despite continued labor constraints. Hiring demand was robust, and wage growth was moderate to strong. Price pressures increased moderately overall. Manufacturing activity increased, but contacts in manufacturing and agriculture remained concerned about negative impacts from trade restrictions. Summer tourism grew moderately overall.

Kansas City
Economic activity expanded modestly in late July and August, including gains in consumer spending, manufacturing, wholesale trade, transportation, high-tech, and professional services. Manufacturing contacts noted that recent trade developments had led to higher input prices and lower capital spending plans for some firms. Prolonged weaknesses in the agricultural sector were increasingly impacting farm borrower finances.

Dallas
Economic activity expanded at a solid pace. Manufacturing and service sectors sustained a healthy pace of growth, while activity in the housing and energy sectors was flat to down. Retail spending accelerated, as did loan demand. Wages and other input costs rose, but firms' ability to pass these increases on to customers was limited.

San Francisco
Economic activity in the Twelfth District continued to expand at a moderate pace. Conditions in the labor market tightened further, and price inflation increased moderately. Sales of retail goods picked up moderately, and activity in the consumer and business services sectors edged down slightly. Activity in the manufacturing sector expanded modestly. Activity in residential and commercial real estate markets was solid. Lending activity ticked up modestly.