Fed's Beige Book: "Modest to moderate" expansion, "concern about tariffs"
Fed's Beige Book "This report was prepared at the Federal Reserve Bank of Dallas based on information collected on or before April 9, 2018."
Economic activity continued to expand at a modest to moderate pace across the 12 Federal Reserve Districts in March and early April. Outlooks remained positive, but contacts in various sectors including manufacturing, agriculture, and transportation expressed concern about the newly imposed and/or proposed tariffs. Consumer spending rose in most regions, with gains noted for nonauto retail sales and tourism, but mixed results for vehicle sales. Manufacturing activity grew moderately, and demand for nonfinancial services was mostly solid. Residential construction and real estate activity expanded further, although low home inventories continued to constrain sales in several Districts. Loan demand increased, and commercial real estate activity and construction improved since the last report. Transportation services activity expanded in over half of the reporting Districts, buoyed by increases in port traffic and/or air, rail and/or trucking shipments. Agricultural conditions were little changed or worsened on net, in part due to persistent drought conditions. Contacts in the energy sector cited a pickup in activity, except in the Richmond District, where coal production was flat and natural gas production dipped slightly.
Widespread employment growth continued, with most Districts characterizing growth as modest to moderate. Labor markets across the country remained tight, restraining job gains in some regions. Contacts continued to note difficulty finding qualified candidates across a broad array of industries and skill levels. Reports of labor shortages over the reporting period were most often cited in high-skill positions, including engineering, information technology, and health care, as well as in construction and transportation. Businesses were responding to labor shortages in a variety of ways, from raising pay to enhancing training to increasing their use of overtime and/or automation, among other strategies. Upward wage pressures persisted but generally did not escalate; most Districts reported wage growth as only modest.