Beige Book Summary: Economic Activity Expanded Moderately-Text>

--Report Prepared by the Cleveland Federal Reserve Bank

--Responses Collected Before May 21

     WASHINGTON (MNI) - The following is an excerpt from the summary of 

the Federal Reserve's report on Current Economic Conditions, known as 

The Beige Book, released Wednesday

Overall Economic Activity 

     Economic activity expanded moderately in late April and early May 

with few shifts in the pattern of growth. The Dallas District was an 

exception, where overall economic activity sped up to a solid pace. 

Manufacturing shifted into higher gear with more than half of the 

districts reporting a pickup in industrial activity and a third of the 

Districts classifying activity as "strong." Fabricated metals, heavy 

industrial machinery, and electronics equipment were noted as areas of 

strength. Rising goods production led to higher freight volumes for 

transportation firms. By contrast, consumer spending was soft. Nonauto 

retail sales growth moderated somewhat and auto sales were flat, 

although there was considerable variation by District and vehicle type. 

In banking, demand for loans ticked higher and banks reported that 

increased competition had led to higher deposit rates. Delinquency rates 

were mostly stable at low levels. Homebuilding and home sales increased 

modestly, on net, and nonresidential construction continued at a 

moderate pace. Contacts noted some concern about the uncertainty of 

international trade policy. Still, outlooks for near term growth were 

generally upbeat. 

Employment and Wages 

     Employment rose at a modest to moderate rate across most Districts. 

Again, the Dallas District was the exception, where solid and widespread 

employment growth was reported. Labor market conditions remained tight 

across the country, and contacts continued to report difficulty filling 

positions across skill levels. Shortages of qualified workers were 

reported in various specialized trades and occupations, including truck 

drivers, sales personnel, carpenters, electricians, painters, and 

information technology professionals. Many firms responded to talent 

shortages by increasing wages as well as the generosity of their 

compensation packages. In the aggregate, however, wage increases 

remained modest in most Districts. Contacts in some Districts expected 

similar employment and wage gains in the coming months. 

Prices 

     Prices rose moderately in most Districts, while the remainder 

reported slight or modest increases. There were several reports of 

rising materials costs, notably for steel, aluminum, oil, oil 

derivatives, lumber, and cement. A few Districts noted that these 

reports of rising materials costs were becoming more common across 

contacts. Input cost increases, along with labor shortages in some 

sectors and strengthening demand, put upward pressure on prices in the 

transportation, construction, and manufacturing sectors. Some Districts 

also noted that their retail contacts were more able to pass along price 

increases to their customers than in the recent past. 

--MNI Washington Bureau;tel: +1 202 371-2121                       

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