The Federal Reserve’s Beige Book this week said overall economic activity expanded slightly, on balance, since late February.
Ten out of the 12 Federal Reserve districts reported either slight or modest economic growth—up from eight in the previous report–while the other two reported no changes.
CONSUMER SPENDING UP
Consumer spending barely increased overall, but reports were quite mixed across districts and spending categories. Several reports mentioned weakness in discretionary spending, as consumers’ price sensitivity remained elevated.
Auto spending was buoyed notably in some districts by improved inventories and dealer incentives, but sales remained sluggish in other districts.
Tourism increased modestly, but reports varied widely. Manufacturing activity declined slightly, as only three districts reported growth in this sector.
Contacts reported slight increases in nonfinancial services activity, and bank lending was nearly flat.
Residential construction increased a little, and home sales strengthened in most districts. In contrast, nonresidential construction was flat, and commercial real estate leasing fell slightly.
The economic outlook among contacts was cautiously optimistic.
LABOR MARKETS
Employment rose at a slight pace overall, with nine districts reporting very slow to modest increases and the remaining three districts reporting no changes. Most districts noted increases in labor supply and in the quality of job applicants.
Several districts reported improved employee retention, and others pointed to staff reductions at some firms. Despite the improvements in labor supply, many districts described persistent shortages of qualified applicants for certain positions, including machinists, trades workers and hospitality workers.
Wages grew at a moderate pace in eight districts, with the remaining four noting only slight to modest increases. Multiple districts said annual wage growth rates recently had returned to their historical averages.
On balance, contacts expected labor demand and supply would remain relatively stable, with modest further job gains and continued moderation of wage growth back to pre-pandemic levels.
PRICES
Price increases were modest, running at about the same pace as in the last report. Disruptions in the Red Sea and the collapse of Baltimore’s Key Bridge caused some shipping delays but so far did not lead to widespread price increases.
Movements in raw materials prices were mixed, but six districts noted moderate increases in energy prices.
Contacts in several districts reported sharp increases in insurance rates, for businesses and homeowners. Another frequent comment was that firms’ ability to pass cost increases on to consumers had weakened considerably.
Inflation also caused strain at nonprofit entities, resulting in some service reductions. Contacts expected inflation would hold steady at a slow pace.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $182.00 per cwt to $185.81, compared with last week’s range of $182.00 to $190.00 per cwt. FOB dressed steers, and heifers went for $287.22 per cwt to $292.58, compared with $289.57 to $295.37.
The USDA choice cutout Thursday was down $1.01 per cwt at $295.80 while select was off $1.61 at $289.27. The choice/select spread widened to $6.53 from $5.93 with 123 loads of fabricated product and 20 loads of trimmings and grinds sold into the spot market.
The daily weighted average USDA listed wholesale price for fresh 90% lean beef was $343.10 per cwt, and 50% beef was $87.19.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.40 to $1.50 a bushel over the May corn contract, which settled at $4.26 3/4 a bushel, down $0.03 1/2.
No live cattle contracts were tendered for delivery Thursday.
The CME Feeder Cattle Index for the seven days ended Wednesday was $242.35 per cwt, down $0.28. This compares with Thursday’s Apr contract settlement of $241.60, up $1.17.