Fed's Beige Book: Hurricane Rebuilding Pushes Prices Higher>

--Nearly All Districts Reported Modest, Moderate Growth

--Consumer Spending Largely Flat But Manufacturing Growth Robust

--Price Pressures Strengthened; Both Selling Prices, Inputs Grew

By Jean Yung     

     WASHINGTON (MNI) - Nearly all Federal Reserve districts reported 

modest or moderate economic growth in the past six weeks as business 

outlook improved and hurricane-related rebuilding pushed prices higher, 

the latest Beige Book survey showed Wednesday. 

     The survey -- which will inform the Federal Open Market Committee 

of the latest conditions on the ground ahead of its Dec. 12-13 meeting 

-- was conducted by the St. Louis Fed before Nov. 17. 

     Half of the 12 districts reported moderate growth while all but one 

of the rest said economic activity improved modestly. In the Chicago 

district, growth was slight overall, the survey said. 

     Rebuilding after the destructive hurricane season nudged costs 

higher, particularly for construction materials and freight 

transportation, the Beige Book said. Firms in the Dallas Fed district, 

hit particularly hard by Hurricane Harvey earlier this year, reported a 

return to business as usual as the initial post-hurricane surge in 

retail and auto sales "begun to recede." 

     With the districts reporting favorable growth conditions, the 

report should help support an FOMC decision to increase its short-term 

benchmark interest rate by another 25 basis points at the conclusion of 

its December meeting. Policymakers are also due to issue an update to 

their economic projections through 2020, and Fed Chair Janet Yellen will 

hold a press conference afterward. 

     That some businesses were passing through increased input costs to 

consumers should come as welcome news for policymakers concerned about 

weakness in inflation this year. Several districts noted input cost 

increases in transportation and manufacturing and in turned charged 

customers more, the Beige Book said. 

     "Most districts reported modest to moderate growth in selling 

prices and moderate increases in non-labor input costs," the survey 

said. 

     An IT service provider in the Richmond district reported "it was 

able to raise prices considerably in recent months without losing any 

customers." On Broadway in New York, theater ticket prices were up 15% 

from a year earlier. 

     Pre-holiday consumer spending on retail and autos were mixed but 

largely flat, though the "outlook for holiday sales was generally 

optimistic," the survey said. 

     Manufacturing activity expanded in all districts and most firms 

said they expected activity to continue to pick up. Demand from overseas 

spurred sales, and many respondents were optimistic about 2018. 

Factories in the Cleveland and St. Louis districts said they were also 

spending more on plant expansions and product development. 

     Businesses overall continued to report very tight labor market 

conditions, saying they were having difficulties finding qualified 

workers across various skill levels. Wage grwoth was "modest or 

moderate" in most districts though some employers were using signing 

bonuses and other nonwage benefits to attract new hires. 

     Residential real esstate activity remained constrained while 

commercial activity grew slightly. 

--MNI Washington Bureau, +1 202-371-2121; email: 

jean.yung@marketnews.com 

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