The Strategist

The US economy keeps growing amid concerns about trade problems

05/31/2018 - 12:53

Economic activity in all 12 regions of the USA continued to grow at the end of April and May. The rates slightly changed compared to previous months. The only exception was the Dallas district, where the growth intensified to solid, according to the Federal Reserve’s review published on Wednesday. The color of the cover is beige, so the paper is called the Beige Book.

The problems of foreign trade are of concern to a number of the Fed’s respondents. Particular concern was expressed by industrialists in the district of the Federal Reserve Bank (BFR) of Boston.

At the same time, the Central Bank drew attention to the positive dynamics in the processing industry: more than half of the districts reported growth, while activity was called "strong" in a third of the districts, especially in metallurgy, heavy engineering and electronics manufacturing.

Consumer spending was weak; the growth in retail sales excluding cars slowed slightly, and car sales remained virtually unchanged.

Representatives of banks reported that is an increase in the demand for loans in the banking industry. This is a result of increased competition and, consequently, growing rates on deposits. Volumes of housing construction and house sales increased at a restrained pace.

The growth in employment in most districts ranged from modest to moderate. Dallas County also was an exception here: the region reported of a strong rise in employment in all sectors.

The price increase in most of the districts was moderate; in some regions there was a noticeable increase in the prices of raw materials and materials, especially steel, aluminum, oil, oil products, timber and cement. The respondents linked the increase in prices for steel and aluminum to introduction of import duties in March this year and the continued uncertainty regarding such duties for supplies from a number of countries, including the European Union.

The review of the Beige Book, which is formed on the basis of data from twelve Federal Reserve Banks, is published approximately two weeks before the meeting of the Federal Reserve. The next meeting of the leadership of the US Central Bank is scheduled for June 12-13. The market participants practically do not doubt increase of the rate by another 25 basis points at the June meeting.

The information used in the last review was collected on May 21 inclusive and processed by the Federal Reserve Bank of Cleveland.