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The Federal Reserve released it's Biege Book Wednesday with the focus on wages and labor markets. The labor market continues to confound the bankers as despite a tight labor market restraining growth wage pressure remains modest. The Fed wants to see wage pressures to pressure prices and inflation as the market has priced in an 80% chance of another interest rate hike. 

This report was prepared at the Federal Reserve Bank of Minneapolis based on information collected on or before October 6, 2017. 

Fed Boardroom

This document summarizes comments received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.

Highlights of October 2017 Beige Book

Growth

  • Modest-to-moderate pace is the same as the prior Beige Book
  • Retail spending rose slowly
  • Home sales constrained by low inventory, construction improved

 

Wages & Labor Market

  • Wage pressures modest to moderate despite tight labor market
  • Some retailers reported that they have raised their wage offers somewhat in order to attract new hires
  • Economy advanced amid 'widespread labor tightness'
  • Labor shortages restraining growth in some sectors, including building, transport and skilled manufacturing
  • Growing use of sign-on bonuses to attract workers.

 

Inflation

  • Price pressures remain modest
  • Several manufacturing contacts reported price increases.
  • A packaging firm recently raised prices 10 percent; they also reported an 8 percent to 10 percent increase in material costs over the year in the North East.

 

Dallas FRB Re: Hurricane Harvey

Summary of Economic Activity The Eleventh District economy continued to expand at a moderate pace over the past six weeks, and most contacts do not expect significant long-term disruption due to Hurricane Harvey. Manufacturing output strengthened, and activity in nonfinancial services increased. Retail sales growth continued to accelerate, with a surge in auto sales to replace vehicles damaged by the hurricane. Homes sales weakened during the reporting period and prices were flat. Growth in the financial services and energy sectors continued but at a slower pace, and crop conditions remained mostly favorable. Employment, wages and prices increased, particularly in manufacturing. Outlooks remained positive overall.

Source : Beige Book October 18 2017

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