Question

Beige Book - April 18, 2018

The Federal Reserve released its regular "Beige Book." the April 18th release. Read and write a one page summarizing the details of the report. What’s happening in employment and wages, price and consumer spending, Manufacturing and Distribution, service and finance and banking in March.

Federal Reserve Bank of New York

Overall Economic Activity
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.

Employment and Wages
The labor market has remained tight and hiring activity has been steady. One employment agency in upstate New York noted a seasonal pickup in hiring. A major New York City agency indicated that hiring has been robust and that it is taking longer to fill jobs, particularly those requiring technical skills. Businesses noted particular shortages of tech workers, truck drivers, and skilled tradespeople. A few contacts cited difficulties in attracting young job-seekers away from major urban centers.

Business contacts in the finance and information sectors reported fairly brisk hiring activity, while those in manufacturing, wholesale trade, education & health, and leisure & hospitality indicated modest hiring, on net. Retailers continued to report declining employment. Still, firms in most service industries, including retail, said they plan to expand hiring in the months ahead, while manufacturers have scaled back hiring plans.

Businesses across all major service industries reported ongoing wage pressures. Some contacts maintained that wages had accelerated over the past year, though plans to raise wages in the months ahead were little changed. A New York City agency reports that a new law prohibiting potential employers from asking about a candidate's salary history has led candidates to demand higher pay.

Prices
Input prices have continued to rise briskly but have not accelerated further, according to contacts in most industry sectors. Still, businesses generally anticipated further increases in the months ahead. A growing proportion of service-sector contacts indicated that they were raising their selling prices--most notably, wholesalers--but manufacturers noted only modest hikes in their prices.

Among retailers, some contacts indicated that they have held prices steady, while others reported price increases. Prices for New York City hotel rooms and Broadway theater tickets picked up noticeably in March. Looking ahead, a growing proportion of businesses in manufacturing and wholesale trade said that they planned to raise their prices, while most retailers did not foresee any significant price hikes.

Consumer Spending
Retail contacts reported that sales have picked up somewhat in recent weeks but are still considered lackluster, reflecting unseasonably cold and wet weather. Retailers in upstate New York indicated that sales have strengthened but remained fairly subdued, despite strong customer traffic. A major retail chain noted that sales advanced in March, running somewhat ahead of plan and up modestly from a year ago. Inventories were generally reported to be at satisfactory levels, and retailers were moderately optimistic about the near-term outlook.

New vehicle sales in upstate New York were reported to have weakened in February but there were some signs of a rebound in March. Sales of used cars were steady to up slightly. Vehicle inventories were said to be in fairly good shape. Dealers continued to characterize retail and wholesale credit conditions as favorable. Consumer confidence in the Middle Atlantic states (NY, NJ, PA) edged up to a new multi-year high in March.

Manufacturing and Distribution
Manufacturers reported some acceleration in growth since the last report. In contrast, wholesalers indicated a pause in growth, and transportation firms reported some decline in activity. Looking ahead, manufacturers have become substantially less optimistic about the near-term outlook, while contacts in wholesale distribution and transportation have remained moderately optimistic.

Services
Reports from service-sector firms were mixed but generally pointed to little growth in activity. Contacts in professional & business services and leisure & hospitality reported modest growth, while those in the information and health & education sectors reported flat activity. Service sector businesses have grown less optimistic about the near-term outlook, most notably in the health & education sector.

Tourism in New York City has picked up since the last report. Hotels reported an increase in both revenues and occupancy rates in March. Broadway theaters indicated that business was sluggish in February and early March but picked up noticeably in the second half of the month.

Banking and Finance
Small to medium size banks in the District reported higher demand for residential mortgages, commercial mortgages, and C&I loans, and steady demand for consumer loans. Banks reported lower loan spreads for consumer loans and residential mortgages, and no change in spreads across all other loan categories. Bankers reported that both credit standards and delinquency rates were unchanged across all loan categories.

Answer 1

1. Employment and Wages: Hiring activity is, on the whole stable. Hiring activity is brisk, although slow in case of technical jobs. Certain businesses face shortage of jobs and attracting youngsters towards non-urban jobs become difficult. Hiring is high in manufacturing field and modest in service sector on net. Retailers have presently no hiring expansion plans and they are promising to do so in furture. Service sector employees are demanding higher wages

2. Input prices in industry sector have risen and no further rise is anticipated. Wholesalers and service sector increased selling prices while manufacturers see only a moderate increase. Retailers, especially in service sector plan to rise prices.

3. Due to weather conditions and the like retail sales are not brisky but satisfactory. Demand for used cars is better than new ones. Demand for vehicle inventories, wholesale and retail credit are favourable

4. Manufacturing and Distribution: Manufacturers are optimistic while modest optimisim is present in wholesale distribution and transportation fields

5. Services: There is a mixed response from services. Tourism and hotel industry improved while health,education and entertainment fields remain slow moving

6. Banking and Finance: Heavy demand for mortgage loans is observed with Small and Medium banks whereas banks in general have lower spreads for consumer loans. No change in credit standards and delinquency rates in the banking sector