(Bloomberg) -- A majority of Federal Reserve districts reportedmodest to moderate economic growth, though uncertainties overtrade and labor shortages put pressure on firms, a survey fromthe U.S. central bank showed.
“Several districts indicated that firms faced rising materialsand shipping costs, uncertainties over the trade environmentand/or difficulties finding qualified workers,” according tothe report, released Wednesday in Washington.
The central bank's Beige Book economic report, based onanecdotal information collected by the 12 regional Fed banksthrough Oct. 15, continued to show that companies are generallynot responding to the tightening labor market with significantlyhigher wages.
While some firms offered signing bonuses, flexible hours andmore vacation time in order to woo and retain workers, thereport characterized wage growth as “modest to moderate.” Mostbusinesses also expected wage gains to remain “modest tomoderate” over the coming six months.
Economy On Track
Prepared by the Richmond Fed, the report will be reviewed bypolicy makers as they prepare for their Nov. 7-8 meeting.Officials have penciled in one more interest-rate hike for thisyear.
The U.S. economy is on track to post its best back-to-backquarters of growth since 2014 when third quarter data isreleased on Friday. Economists surveyed by Bloomberg expect a3.3 percent annualized pace of expansion in the July-Septemberperiod after a 4.2 percent gain in the prior quarter.
The Beige Book continued to point to anxiety among U.S. firmsover the ongoing trade dispute with China. Manufacturersreported they were raising prices out of necessity as tariffsdrove up the cost of raw materials, including metals.
“New car prices are also expected to increase significantly tocover the burden of recently implemented tariffs,” the BostonFed reported in one of many anecdotes included in the survey.
Labor Shortages
The report also pointed to widespread labor shortages that were“linked to wage increases and/or constrained growth.”
In the Philadelphia district, one firm noted difficultylaunching a third shift because of a lack of workers whileanother was planning to add robots.
Unemployment fell to 3.7 percent in September, though wages andoverall inflation have remained muted. Average hourly earningsfor the year through September rose 2.8 percent, in line with aslow upward trend over the past several years.
Anecdotes on housing were mixed with homebuilders in Clevelandreporting a modest fall in demand because of decrease inaffordability.
The Dallas district, which includes many areas benefitting fromhigher energy prices, continued to be a particularly bright spotwith “solid” growth in manufacturing, retail and nonfinancialservices.
©2018 Bloomberg L.P.
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