The Federal Reserve Bank Wednesday said the US economy was showing mostly slight to modest growth.
The Bank, in its latest Beige Book, reporting on economic activity across its 12 districts, said there was ongoing growth in manufacturing, although some districts reported a slowing in the pace of growth.
GROWTH REPORTED
Contacts in most districts reported ongoing growth in manufacturing. Retail contacts noted some softening as consumers faced higher prices, and residential real estate contacts observed weakness as buyers faced high prices and rising interest rates.
Contacts tended to cite labor market difficulties as their greatest challenge, followed by supply chain disruptions. Rising interest rates, general inflation, the Russian invasion of Ukraine and disruptions from COVID-19 cases (especially in the Northeast) rounded out the key concerns affecting household and business plans.
Eight districts said expectations of future growth among their contacts had diminished. Contacts in three districts specifically expressed concerns about a recession.
LABOR MARKETS
Most districts reported that employment rose modestly or moderately in a labor market that all districts described as tight. One district explicitly reported that the pace of job growth had slowed, but some firms in most of the coastal districts reported hiring freezes or other signs that market tightness had begun to ease.
However, employee shortages continued to force many firms to operate below capacity. In response, firms continued to deploy automation, offer greater job flexibility and raise wages.
In a majority of districts, firms reported strong wage growth, whereas most others reported moderate growth. In a few districts, firms reported that wage rate increases were leveling off or edging lower.
Moreover, while firms throughout the country generally anticipated wages to rise further over the next year, one district indicated that its firms’ expected rate of wage growth had fallen for two straight quarters.
PRICES
Most Districts said their contacts had reported strong or robust price increases, especially for input prices. Two districts said this rapid inflation was a continuation of a trend.
However, three districts said price increases for their own goods or services had moderated somewhat – across the board (among Philadelphia firms) or for some segments (used cars in Boston and manufacturing in Richmond).
About half of the districts said many contacts maintained pricing power – passing costs on to clients and consumers, often with fuel surcharges.
However, more than half of the districts cited some customer pushback, such as smaller volume purchases or substitution of less expensive brands. Surveys in two districts pegged year-ahead increases of their selling prices as ranging from 4% to 5%.
Moreover, one district said its firms’ price expectations had edged lower for two straight quarters.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $139.71 to $147.00 per cwt, compared with last week’s range of $138.39 to $143.18. FOB dressed steers, and heifers went for $217.18 to $218.57 per cwt, versus $216.86 to $220.73.
The USDA choice cutout Wednesday was down $0.12 per cwt at $267.42, while select was up $0.26 at $248.91. The choice/select spread narrowed to $18.51 from $18.89 with 127 loads of fabricated product and 19 loads of trimmings and grinds sold into the spot market.
The USDA reported that basis bids for corn from feeders in the Southern Plains were unchanged at $1.55 to $1.65 a bushel over the Jul futures and for southwest Kansas were steady at even the Jul, which settled at $7.31 1/4 a bushel, down $0.22 1/4.
The CME Feeder Cattle Index for the seven days ended Tuesday was $153.36 per cwt up $0.14. This compares with Wednesday’s Aug contract settlement of $169.72, up $4.60.