Beige Book: economic activity continued to expand at a “modest to moderate pace” - Nomura

Analysts at Nomura noted that the Beige Book for the upcoming 1-2 May FOMC meeting indicated that economic activity continued to expand at a “modest to moderate pace” with a generally positive outlook.

Key Quotes:

"However, trade concerns loomed large over many districts as “manufacturing, agriculture, and transportation expressed concern about the newly imposed and/or proposed tariffs.”Aside from the trade concerns, most incoming anecdotal information on growth seemed positive."

"Labor market activity showed a modest pickup in hiring with continued wage pressures from labor shortages reflecting the tightening labor market. Business contacts reported using enhanced training, automation and other strategies to cope with ongoing labor shortages."

"In the April Beige Book, “most Districts reported wage growth as only modest,” a slight pull back relative to February when “wage growth picked up to a moderate pace.” Price pressures appeared mostly unchanged between February and April. However, many contacts reported “that steel prices rose, sometimes dramatically, due to the new tariff.”"

"Moreover, prices for building materials continued to “rise briskly.” Both soon-to-be NY Fed Chief John Williams and Federal Reserve Bank of Atlanta President Raphael Bostic noted yesterday that business confidence could be negatively affected by talk of a trade war, even if no tariffs materialize."

"With steel and aluminum tariffs now in effect, and the potential for an escalating trade confrontation with China, today’s Beige Book supports that view."