US October Beige Book suggests high greenback weighing on manufacturing and tourism

The most recent Beige Book, for the survey period between mid-August and early-October, indicates that economic activity increased at a modest (half of Districts) or moderate (quarter of Districts) pace in most of the country. Boston and Richmond Districts also reported increases in economic activity while only the Kansas City District noted a slight decline in economic output. Consumer spending increased in most Districts led by strength in automotive sales. Nonautomotive sales also advanced at a modest to moderate pace. Tourism activity was mixed, with strength in some Districts (Chicago, Philly, Atlanta) offset by weakness in New York, Minneapolis and Dallas Districts which are suffering from a high dollar and/or a slump in the energy industry.

Nonfinancial services generally strengthened across the country with spillovers to activity from the slump in energy prices and high dollar appearing contained to transport services. Manufacturing activity was quantified as sluggish, aside for the strength in transportation equipment industries. Some Districts quoted outright declines in activity resulting from a high dollar and falling demand from energy investment.

Housing was generally seen as improving across the country with prices and transactions up broadly. Lower or moderately priced homes appear to be outperforming the high end of the market, while nearly half of all Districts reporting inventory shortages. Commercial real estate demand also improved nationally. Credit conditions were generally positive with declining delinquencies and improving loan quality broadly reported.

Aside for manufacturers and mining firms, who are not hiring and are sometimes cutting staff, labor conditions have continued to improve with most domestically-oriented firms planning to hire employees in the coming months. Some labor shortages have been reported in both high-skill but also lower-skill services, leading to wage pressures in some industries. Moreover, some Districts suggested that higher minimum wages have begun to filter to lower-skilled wages in the retail industry. Price pressures remain contained in light of the lower energy, IT, and agriculture goods prices.