July Rate Hike Odds Rise As Beige Book Signals "Tight Job Market", "Modest Growth"

The Beige Book offered its ubiquitous modest, moderate, mummified growth outlook but added a few points that provide The Fed more ammo for hiking rates.

The key higlights from the report:

tight labor markets ‘widely noted’ amid modest growth

U.S. employment, wages grew modestly since mid-april

price pressures grew slightly in most districts

contacts in several district ‘generally optimistic’

consumer spending up modestly, manufacturing mixed

construction, real estate grew, outlook remained positive

loan demand up moderately except for Dallas district

many Fed districts reported steady to good credit availability

energy sector remained weak

Chicago, Kansas city Fed districts saw slower growth pace

Dallas Fed district grew ‘marginally,’ New York generally flat

Some key anecdotes from the regional feds:

Consumer spending and tourism activity was up modestly in many Districts

Boston: March closed sales of single-family homes increased year-over-year in all six New England states

New York: Retailers report that inventories are on the high side, particularly for warm weather apparel

Philadelphia: Auto dealers reported that light vehicle sales have slowed somewhat during the current period

Cleveland: Only consumer spending segment reporting strong activity was restaurants

Richmond: Natural gas extraction increased since the previous report, while coal production was unchanged

Atlanta: Firms seeking employees for high-demand fields, such as information technology, healthcare, engineering, and construction continued to experience difficulty filling jobs

Chicago: Contacts again reported an increase in the length of auto loans

St. Louis: Even with a near-perfect year in the field, most row crop operations will struggle to break even unless a crop price rebound is sustained and significant

Minneapolis: Number of active drilling rigs in the District continued to fall through mid-May, reaching its lowest level in more than 10 years

Kansas City: Several retailers noted an increase in sales for lower-priced items and spring outdoor products, while luxury products sold poorly

Dallas: Gulf Coast chemical producers said margins were higher compared with the first quarter

San Francisco: Contacts reported that minimum wage increases pushed up wages for low-skilled workers in various service sectors, with diminishing ripple effects up the pay scale