Fed's Beige Book: growing modestly above trend - Nomura

Analysts at Nomura offered a review of the US Beige Book.

Key Quotes:

"Comments collected for the Federal Reserve Beige Book prepared for the September FOMC meeting describe an economy that is growing modestly above trend. This issue reported modest to moderate growth, an improvement from slight to moderate growth in the previous print. Consumer spending increased in most Fed Districts, in line with solid pace of increase in non-auto retail sales in recent months. However, contacts in many Districts remained wary of continued slowdown in the auto sector. Sales and production of autos have been mixed. Industry challenges such as cheaper used car prices would continue to weigh on auto sales in the near term. In addition, construction remained as a soft spot with commercial real estate activity increasing only slightly.

On Hurricane Harvey, the cutoff date of the data gathered for this issue of Beige Book was 28 August. Beige Book noted that it was too soon to gauge the full extent of the impact of Harvey. The energy sector activity appeared to have been steady leading up to refinery outages caused by Harvey, but the damage would likely be felt in coming months. 

As expected, the continued expansion in labor markets was reiterated in Beige Book although the pace of growth was reported as slight to modest in most Districts. Despite tight labor market, wage pressure was reported as modest to moderate. Last, Beige Book noted prices rose only modestly across Districts. Although input and material costs rose in general, the pass-through to downstream prices appear to have been limited, partially explaining the discrepancy between continued pressure on pipeline prices reflected in business surveys and modest core inflation in recent months."