The U.S. economy looks set to rebound this spring after last winter's lackluster showing. The Federal Reserve’s Beige Book revealed Wednesday that the economy grew at a “modest to moderate” pace in the past few months, and the Fed's outlook is optimistic for multiple sectors, including construction, manufacturing, retail and auto.
The Beige Book comes just a week after a report showed the U.S. economy shrank in the first three months of the year, contracting 0.7 percent, driven by a slowdown in shipping due to labor disputes at West Coast ports. But economists forecast the U.S. economy is likely growing at a rate between 1.5 percent and 3 percent in the April-June period.
Market professionals analyze the Fed’s Beige Book for any indication of the central bank's timing on interest rate hikes anticipated for later this year. The increases would be the first in nearly a decade. Rates have remained at historic lows since the financial crisis in 2008.
This week, Wall Street is focusing on the U.S. jobs report, released Friday, as strong figures could provide further evidence the Federal Reserve will lift interest rates in late summer or early fall. Most economists expect the Fed to hike rates in September.
The Beige Book, which the central bank publishes eight times a year, highlights the current condition of the U.S. economy in each of the Fed's 12 districts. It covers a range of economic activity, from manufacturing to construction to wage growth, and gives economists a glimpse of the economy's current status.
The report summarizes anecdotal comments from businesses and other contacts outside the Federal Reserve and is not a commentary on the views of Fed officials.
A contact in the New York District said delays at West Coast ports have subsided as the region is catching up on transporting the backlog of goods that resulted from the dispute. Meanwhile, auto inventories in the Chicago District were elevated for car dealerships due to increased demand for SUVs and trucks as lower gasoline prices continued to spur a shift from cars to light trucks or SUVs.
However, some businesses reported seeing labor shortages in eight of the Fed’s 12 districts, including Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, and Kansas City. An ongoing and widespread shortage of truck drivers was noted in the New York, Cleveland, and Kansas City Districts. Shortages of skilled labor remained a constraint on construction activity in some districts, such as Boston, Cleveland, and San Francisco.
The Richmond District reported employment declines in West Virginia's coal and gas industries and the Minneapolis District said online job openings in the energy-producing area of North Dakota were down significantly from a year ago.
Each of the Fed’s Beige Books is published two weeks before the Federal Open Market Committee (FOMC), which is composed of the Fed's seven boards of governors and five Reserve Bank presidents. The FOMC's next two-day policy meeting is June 16-17, which will include the central bank’s economic projections and a press conference by Fed Chair Janet Yellen.