'Freight Recession,' Persistent Job Tightness And Sticky Inflation: 3 Takeaways From The Fed's May Beige Book

The Federal Reserve's May Beige Book provides a qualitative assessment of economic conditions across the various Federal Reserve districts.

Published eight times a year, this report gathers data through surveys and interviews with a wide range of contacts including companies, community organizations, economists and market experts.

Markets were little changed after the release of the Beige Book Wednesday, with the SPDR S&P 500 ETF Trust SPY attempting a slight rebound after hitting intraday lows in the morning session. 
Why It Matters: What sets the Beige Book apart is its ability to capture information that may not be reflected in existing economic statistics. This makes it a valuable supplementary source of information for the Federal Open Market Committee (FOMC) to assess the outlook and make decisions regarding monetary policy. 

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3 Takeaways From The Fed's May Beige Book:

1) Freight, Commercial Real Estate Feel The Crisis

• Overall economic activity remained largely unchanged, with most districts reporting steady or increased consumer spending.
• However, there were concerns about future growth expectations, indicating some deterioration in economic outlook.
• The transportation services industry experienced significant disruptions, particularly in trucking, where a "freight recession" was reported.
• The commercial real estate sector, specifically the office segment, continued to face challenges and remained weak.
• Another notable observation was the increase in consumer loan delinquencies reported in several districts.

2) Labor Market Tightness Persists

• The labor market remained robust, with businesses struggling to find workers across various skill levels and industries.
• Some contacts mentioned that they had reached full staffing levels, while others reported pausing hiring or reducing headcounts due to weaker demand.
• Wage growth continued at a moderate pace, which is a factor the Federal Reserve may closely monitor.

3) Inflation Continues To Rise — At Slower Pace

• Moderate price increases were observed during the reporting period, although the pace of growth decelerated in several districts, influenced by strong demand and escalating costs.
• Home prices and rents experienced slight upward movements overall across most districts, following a period of minimal growth.
• Some non-labor inputs, including shipping and certain raw materials, saw price declines during this period.

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