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April 25, 2007
Beige Book
The Beige Book was released today. Some media reports quote only the first half of the first sentence. The second half is also noteworthy.
Most Federal Reserve Districts noted only modest or moderate expansions in economic activity since the previous report, however two--New York and Minneapolis--reported steady and firm growth, respectively, and Dallas characterized growth as moderately strong.
Two of the three districts reporting the strongest overall economic activity cited manufacturing.
Manufacturing activity remained slow overall, although reports on conditions in the manufacturing sector varied across Districts. Dallas and Minneapolis, for example, reported expansion, while Chicago reported a recent firming of activity.
On labor markets,
Most Districts reported continuing tight labor market conditions, especially for skilled occupations, although several Districts reported expansions in employment levels.
How does that translate to wages? It depends on the sector.
Wage increases were reported in some industries of the New York, Philadelphia, Richmond, Atlanta, Chicago, Minneapolis, Kansas City, Dallas, and San Francisco Districts. These were generally modest. Specifically, the New York, Richmond, Atlanta, and Dallas Districts noted wage increases in some services sectors, and the Richmond District also noted faster wage growth in the retail sector. The Dallas District noted that continued layoffs reported by homebuilders and some manufacturers resulted in downward wage pressures. The San Francisco District indicated that wage pressures eased in the construction and agriculture sectors. Except for energy-related businesses, wage pressures in the Cleveland District were largely contained, but wage pressures edged higher in the Kansas City District. There were reports of wage pressures for skilled workers in the Dallas District and for in-store pharmacists in the Cleveland District. The Chicago, Dallas, and San Francisco Districts also noted faster growth in pay rates for some skilled positions.
What about inflation pressures?
Consumer prices remained generally stable or increased modestly, but most Districts reported a rise in input prices, particularly for metals and raw materials. However, a number of Districts reported low or declining lumber prices. Higher energy and/or fuel costs were noted in the Philadelphia, Richmond, Atlanta, Chicago, Minneapolis, Kansas City, and Dallas Districts. In response to higher input prices, some manufacturing businesses in the Boston, Cleveland, Chicago, and Dallas Districts were able to raise output prices. In contrast, some manufacturers in the Kansas City and San Francisco District were unable to raise output prices. Retailers and service firms in the New York, Philadelphia, Kansas City, Richmond, and Dallas Districts indicated that prices remained stable or increased modestly.
Posted by William Polley at April 25, 2007 10:21 PM
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