Perhaps its a remnant from 2014 and 2015, but the first thing we noticed when skimming through the April Fed Beige Book is that "weather" continues to play an impact on the US economy: after declining from 26 mentions of the word "weather" in the January beige book, down to 17 in March, April saw a fractional pick up, with 18 cases of the word appearing in the just released Fed report.
Also notably, after three mentions of "stock market"in the March beige book, the April one did not resort to blaming the market for anything even once. Most curious, however, was that after the Fed admitted it is only focusing on "global" conditions in its latest statement, and with 11 mentions in the March edition, in April the Fed used "global" just twice.
We find this a very odd lack of mentions for the one key factor that the Fed supposedly is most focused on. So what did the Beige book focus on instead? Here are the key highlights:
- Reports from the twelve Federal Reserve Districts suggest that national economic activity continued to expand in late February and March, though the pace of growth varied across Districts.
- Most Districts said that economic growth was in the modest to moderate range and that contacts expected growth would remain in that range going forward.
- Consumer spending increased modestly in most Districts and reports on tourism were mostly positive.
- Labor market conditions continued to strengthen and business spending generally expanded across most Districts.
- Demand for nonfinancial services grew moderately overall. Manufacturing activity increased in most Districts.
- Construction and real estate activity also expanded.
- Credit conditions improved, on net, in most Districts.
- Low prices weighed on energy and mining output as well as prospects for agricultural producers. Overall, prices increased modestly across the majority of Districts, and input cost pressures continued to ease
A glowing picture of a healthy economy some would say. So why is the Fed not hiking?
And then there was the Fed's take on wage growth, arguably the most important domestic economic "data" from the data-dependent Fed. This is what it said in January:
Overall, wage pressures remained relatively subdued, as evidenced by reports from Philadelphia, Atlanta, Chicago, and Kansas City. Just two Districts--New York and San Francisco--indicated some acceleration in upward wage pressures.
Wages improved in March:
Wages generally increased, as most Districts experienced slight to strong wage growth. However, the Kansas City, Richmond and Atlanta Districts reported flat wage growth. St. Louis noted strong wage growth as fifty-six percent of contacts, the highest in two years, reported that wages were above year-ago levels. Cleveland, Richmond, Atlanta, Chicago, St Louis, Minneapolis, and San Francisco reported positive wage growth among high-skilled workers, especially for occupations in the technology, high-skilled manufacturing, aerospace and defense, financial services, and professional technical sectors.
Fast forward to April where we now read that wages increased in all districts except Atlanta.
Wages increased in all but one District (Atlanta), and several Districts reported signs of a pickup in wage growth over the last survey period. New York, St. Louis, Minneapolis, and San Francisco reported moderate wage growth, while wage pressures were characterized as mild in Chicago, mostly contained in Kansas City, and stable in Atlanta. The strongest wage pressures were for occupations where labor shortages are pressing and turnover is elevated. Contacts in the Boston, Cleveland, and St. Louis Districts cited sizeable wage increases for workers in fields such as information technology services and skilled construction and manufacturing trades. In addition, some firms in Philadelphia indicated that they had raised their starting wages in order to attract higher quality workers, and Chicago noted an increase in the number of contacts who raised wages for low-skilled entry-level workers.
The summary: modest to moderate growth, increasing consumer spending, stronger labor market conditions, improving labor market conditions, and most importantly, rising wages almost across the board. And virtually no mention of "global" conditions (and certainly no mention of China). So what excuse will the Fed use not to hike in April again?