Fed’s Beige Book suggests continued moderate U.S. economic growth

The U.S. Fed’s Beige Book shows that the American economic activity has continued to grow at a modest-to-moderate rate across the nation between the period of mid-February and the end of March, noted TD Economics in a research report. Half of the districts have recorded moderate gains. The report did not stress on the notion that weather effects might have contributed to a deceleration in economic activity in the first quarter of this year.

Labour markets have tightened further. Meanwhile, there has been a modest increase in wages. However, they have been held responsible for constraining growth in certain sectors, such as transportation, manufacturing and construction. Employers have been quoting increasing turnover rates and suggested that they might hike wages moderately in months ahead, stated TD Economics.

In the meantime, sales activity has been restrained by low levels of inventory in spite of solid demand for housing. This has led to an upward pressure on home prices throughout the nation, which might negatively impact first time homebuyers. In all, demand for housing is bolstering despite the higher mortgage rates because of a rebounding labor market and income gains.

Rise in prices were seen as just modest by businesses. Small rises in selling prices were recorded by manufacturers, whereas restauranteurs just raise menu prices slightly as falls in grocery store prices partially countered labor cost rises at restaurants.

Meanwhile, the manufacturing sector has continued to display strength in spite of a deceleration in the pace of freight shipment growth, stated TD Economics. Investment is expected to be delated due to persistent policy uncertainty regarding trade deals.

“All told, this Beige Book provides further confirmation that the economy is continuing to expand at a decent clip and suggests continued, albeit moderate, economic improvement – something that's likely enough to motivate the Fed to pursue its gradual rate-raising path”, added TD Economics.