The US Federal Reserve Bank issued its Beige Book Wednesday, an assessment of economic activity in the country, and said economic activity increased in almost all Federal Reserve districts, but remained well below where it was prior to the COVID-19 pandemic.
OVERALL ECONOMIC ACTIVITY
Consumer spending picked up as many nonessential businesses were allowed to reopen, the Beige Book said. Retail sales rose in all districts, led by a rebound in vehicle sales and sustained growth in the food and beverage and home improvement sectors.
Leisure and hospitality spending improved, but was far below year-ago levels, the Federal Reserve said. Most Districts reported manufacturing activity had moved up, but from a very low level.
Demand for professional and business services increased in most districts, but was still weak, the Beige Book said. Transportation activity rose overall on higher truck and air cargo volumes.
Construction activity remained subdued, but picked up in some Districts, the Fed said. Home sales increased moderately, but commercial real estate activity stayed at a low level.
Financial conditions in the agriculture sector remained poor, while energy sector activity fell further because of limited demand and oversupply, the Beige Book said.
Loan demand was flat outside of some Paycheck Protection Program activity and increased residential mortgages, the Book said. The PPP and loan deferrals by private lenders reportedly provided many firms with sufficient liquidity for the near term.
Outlooks remained highly uncertain, as contacts grappled with how long the COVID-19 pandemic would continue and the magnitude of its economic implications, the Beige Book said.
EMPLOYMENTG AND WAGES
Employment increased on net in almost all districts as many businesses reopened or ramped up activity.
Districts highlighted gains in the retail and leisure and hospitality sectors, but payrolls in all districts were well below pre-pandemic levels, the Federal Reserve said.
Job turnover rates remained high, with contacts across districts reporting new layoffs, the Book said. Contacts in nearly every district reported difficulty in bringing back employees because of health and safety concerns, childcare needs and generous unemployment insurance benefits.
Many contacts who have been retaining employees with help from the PPP said that going forward, the strength of demand would determine whether they could avoid layoffs.
PRICES
Prices were little changed overall, the bank said. Contacts across districts largely reported input and selling prices were flat. When input prices did change, increases slightly outnumbered decreases.
Contacts in several districts reported supply chain challenges were pushing prices up for health and safety equipment used to limit the spread of COVID-19, the Fed said. There also were reports of rising food and beverage prices, particularly for beef.
When selling prices changed, decreases outnumbered increases, as contacts in several Districts cited weak demand and limited pricing power, the Book said. One exception noted by multiple districts was new and used vehicle prices, which were boosted by low inventories.
CATTLE, BEEF RECAP
Fed cattle sold this week at $94 to $100 per cwt on a live basis, mostly $95 to $98, steady to up $3 from last week. Dressed-basis trading was reported at $157 to $160 per cwt, steady to up $2.
The USDA choice cutout Wednesday was down $0.16 per cwt at $200.76, while select was up $0.52 at $191.37. The choice/select spread narrowed to $9.39 from $10.07 with 124 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Tuesday was $135.91 per cwt, up $0.29. This compares with Wednesday’s Aug contract settlement of $139.42, up $2.70.