The Federal Reserve's assessment of the economy is not improving, with modest-to-moderate once again the general call and with descriptions of "flattening out" and "slowing" now popping up. The Beige Book reports waning optimism in several of the Fed's 12 districts and says consumer spending is softening in many. But, as in this year's prior reports, the Beige Book notes that the labor market continues to tighten with most districts citing shortages. Yet also like in prior reports, wage growth is still subdued. Inflation in general is described as little changed at moderate growth. The assessment for the manufacturing sector, where regional reports have been very strong, is no better than moderate as is the assessment for nonfinancial services.
Expectations are strong that the Fed will raise its funds rate at the coming FOMC meeting but this report, underscoring the run of weak economic data including on inflation, is not confirming those expectations. The only main risk to these expectations would be sharp weakness in Friday's employment report. Today's report was compiled by the Philadelphia Fed for the June 13 & 14 FOMC with a response cutoff date of May 22.