Fed's Beige Book Repeats "Modest Improvement", No Rate Hike Odds Reaction

The Beige Book offered its ubiquitous modest, moderate, mummified growth outlook with little insight into whether the Fed is considering any rate hike in the immediate future, with the following summary of the Fed's two non-market mandates: "Labor market conditions remained stable as employment continued to grow modestly since the previous report and wage pressures remained modest to moderate. Price pressures remained slight."

The one hint that the Fed is not preparing further tightening any time soon perhaps came the Fed's take on the state of the US consumer: "Consumer spending was generally positive but with some signs of softening."

Some other highlights:

Manufacturing activity was mixed but generally improved across Districts. Real estate activity continued to strengthen, and banks reported overall increases in loan demand. Agricultural activity was mixed but generally improving. The natural resources and energy sector has remained weak. The outlook was generally positive across broad segments of the economy including retail sales, manufacturing, and real estate. Districts reporting on overall growth expect it to remain modest.

The 10 second summary:

  • U.S. economy grew at ‘modest pace’ in most districts
  • Outlook generally positive across broad areas of economy
  • Employment in the U.S. ‘continued to grow modestly’
  • Wage pressures in the U.S. were ‘modest to moderate’
  • Price pressure ‘remained slight’, Fed’s Beige Book says
  • Consumer spending positive with some signs of softening
  • Upward input price pressures cited in most districts
  • Contacts generally report no movement in selling prices
  • Residential construction mostly postitive across U.S.

The recurring anecdotes from main regions:

  • Economic activity continued to expand at a modest pace across most regions
  • Boston: Single-family home sales increased in all states in the District amid robust buyer demand but low inventory continues to weigh on the residential market.
  • New York: In upstate New York, a mall contact reports that higher-priced retailers have been struggling, reflecting more value-driven consumers.
  • Philadelphia: The makers of lumber products, fabricated metal products, and industrial machinery noted overall gains in activity from the prior period, while the makers of paper, primary metals, and electronic products noted weaker activity.
  • Cleveland: Wage pressures were most evident in high-skilled and entry-level jobs in the banking, construction, and retail sectors.
  • Richmond: An automobile dealership in western Virginia reported that a recent increase in their digital footprint has helped push up foot traffic and sales.
  • Atlanta: Retailers continued to report soft sales from international visitors while sales from domestic shoppers strengthened since the last report.
  • Chicago: Financial market participants reported a significant increase in volatility,driven primarily by the United Kingdom’s vote to exit the European Union.
  • St. Louis: Several companies reported capital expenditure and facility expansion plans in the District, including firms that manufacture motor vehicles, wood products, and beverage products.
  • Minneapolis: Construction activity was low in the Bakken oil region, but commercial permitting in Fargo, N.D., was on par with two previous strong years.
  • Kansas City: Bankers reported modestly stronger loan demand, stable deposit levels and unchanged loan quality and credit standards.
  • Dallas: Fuel and chemical prices on the Gulf Coast increased with oil prices over the reporting period, but remained below year-ago levels.
  • San Francisco: Sales of smartphones picked up, as did demand for connected devices and wearables more generally.

There was no change to the Fed's rate hike odds following the report, with September hike odds at 8% and December at a paltry 16%.