The economy grew at a moderate or modest pace this summer in eight of the Federal Reserve’s 12 USA districts, a slowdown from previous reports that may make Fed policymakers more cautious about an interest rate hike.
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However, Kansas City and NY reported no change in activity, and Philadelphia and Richmond noted that, while still expanding, activity slowed from the previous period.
Consumer spending remained positive, but showed little change since the last report. Activity in residential real estate markets grew at a moderate pace, but the pace of sales was constrained in a few Districts by shortages of available homes.
Labor market conditions remained tight in most Districts, with moderate payroll growth noted in general.
Recouping mid-session losses, USA stocks ended the day largely flat as recovering oil prices balanced a rising dollar, while the Federal Reserve’s “Beige Book” indicated the economy was growing at a moderate pace without much inflationary pressure.
The Beige Book does not show any evidence that the Fed is going to have to act quickly in raising interest rates, but it is consistent with the continuation of a slow and gradual policy normalization process.
The Beige Book evidence supports these expectations, especially with supply constraints although the overall evidence was more mixed.
So it’s not that the latest Beige Book painted an entirely gloomy picture. Fed Chairwoman Janet Yellen in late August said she believed the case for increasing the benchmark federal-funds rate “has strengthened in recent months”, citing the “solid” performance of the labor market as one factor.
The comments come as a decision on whether to raise U.S. interest rates looms later this month.
“Most districts reported a “modest’or “moderate” pace of overall growth”, said the Fed in its latest Beige Book which gauges its 12 districts” economy. That dovetailed with declining demand for energy-related products in the reporting period, although the report noted “some signs of stabilization”.
At that same meeting, Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, said he sees “two rate hikes as possible” through the rest of the year – likely in September and December.
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The Fed raised rates from near zero for the first time in a decade last December, and has emphasized the pace of any further interest rate rises will be historically slow.
