Modest economic growth, subdued job growth, and slowing wage and price growth all reinforce our view that the Fed is done raising rates. (UBS)

Some key quotes from the report:


  • "Contacts from most Districts indicated economic growth was modest during July and August. Consumer spending on tourism was stronger than expected... But other retail spending continued to slow, especially on non-essential items. Some Districts highlighted reports suggesting consumers may have exhausted their savings and are relying more on borrowing to support spending. New auto sales did expand in many Districts, but contacts noted this had more to do with better availability of inventory rather than increased consumer demand."
  • "Job growth was subdued across the nation. Though hiring slowed, most Districts indicated imbalances persisted in the labor market as the availability of skilled workers and the number of applicants remained constrained. Worker retention improved in several Districts, but only in certain sectors such as manufacturing and transportation...Growth in labor cost pressures was elevated in most Districts, often exceeding expectations during the first half of the year. But nearly all Districts indicated businesses renewed their previously unfulfilled expectations that wage growth will slow broadly in the near term."
  • "Most Districts reported price growth slowed overall, decelerating faster in manufacturing and consumer-goods sectors...Contacts in several Districts indicated input price growth slowed less than selling prices, as businesses struggled to pass along cost pressures. As a result, profit margins reportedly fell in several Districts."

Modest economic growth, subdued job growth, and slowing wage and price growth all reinforce our view that the Fed is done raising rates. However, we believe that the upcoming FOMC meeting on 19–20 September is too soon to actually declare an end to the cycle. We expect the dot plot to show a substantial number of FOMC members calling for another hike by year-end. The last major data release ahead of the meeting is CPI for August. While higher gasoline prices will boost the headline CPI, core CPI should show another relatively modest increase.


Main contributor - Brian Rose


Original report - Beige Book should keep Fed on hold, 6 September 2023.