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Highlights
The just released Beige Book prepared for the June 19-20 FOMC meeting found that overall economic activity expanded at a "moderate" pace during the period from early April to late May. Notably, manufacturing continued to expand in most Districts. Production and new orders were up except in Philadelphia, Richmond and St. Louis Districts, where factory activity was mixed or had softened slightly. Standout industries included autos, steel, semiconductors & high-tech equipment, and aircraft.
Consumer spending was unchanged or up modestly. Some Districts reported that unseasonably warm weather and an earlier Easter holiday had shifted sales into the previous reporting period. New vehicle sales remained strong. Auto inventories continue to be tight.
Improvement was seen in residential and commercial real estate with construction picking up in many sections of the U.S. Some Districts reported stronger home sales to cash buyers and investors. Home sales were above year-ago levels in most areas of the country and several Districts noted sales had improved since the previous report but were still sluggish compared to historical trends. The apartment market continued to improve, and multifamily construction increased in several Districts.
Most Districts reported improvement in loan demand and credit conditions. Agricultural conditions generally improved. Energy production and exploration continued to expand, except for coal producers who noted a slight slowing in activity.
Wage pressures overall were modest. Hiring was steady or increased slightly, and contacts in a number of Districts reported difficulties in finding qualified workers, particularly those with specialized skills. Reports of hiring were most prevalent in the manufacturing, construction, information technology, and professional services sectors. Price inflation remained modest across Districts, and overall cost pressures eased as the price of energy inputs declined. Economic outlooks remain positive, but contacts were slightly more guarded in their optimism.
Today's report essentially indicates that the recovery continues at a moderate pace and the anecdotal evidence is a little more positive than some recent indicator news. There is little in the report to move the FOMC closer to additional monetary ease.
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Market Consensus before announcement
The Beige Book is for the June 20 FOMC meeting. More and more question marks are popping up on sector strengths and weakness, so traders will be parsing every section of the Beige Book, although anything related to employment is likely to get extra attention after the disappointing jobs report for May.
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