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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Les H who wrote (26691)	9/22/1999 4:23:00 PM
From: Les H	Read Replies (2) \| Respond to of 99985

FED'S BEIGE BOOK: FEW REPORTS OF WAGE OR PRICE PRESSURES WASHINGTON (MktNews - It's more of the same for the most part -- continued strong economic growth with few signs of generalized wage-price pressures, according to the Federal Reserve's latest survey of economic conditions around the nation. The Fed's beige book, compiled by the St. Louis Fed for review at the Oct. 5 Federal Open Market Committee meeting, did, however, find evidence of a "substantial upswing" in health care benefit costs and "significant increases" in some materials prices. There is little evidence in the district-by-district survey of the slackening of demand the Fed is known to want. Retailers reported continued strength in sales of autos, apparel and other goods -- higher than expected in some cases. Manufacturing activity was found to have "accelerated in almost every district." Loan demand generally was said to have been "well-sustained" despite higher interest rates. Nor was there much evidence of an easing of labor market strains. The beige book did say that several districts reported "a slackening in labor demand," but also reported "widespread labor shortages" in most Federal Reserve districts, as "demand for labor continues to outstrip the readily available supply of labor." The beige book findings were based on survey results gathered before Sept. 13. "All district economies continue to exhibit overall strength, with most experiencing moderate-to-brisk rates of growth," according to the beige book. Yet there were "few reports of acceleration in nominal wages and salaries, although some districts note a substantial upswing in the cost of health-care benefits." The Fed report said retail sales have been "generally up in most districts, with back-to-school sales meeting or exceeding retailers' expectations in many cases." It added that vehicle sales have been "robust" with some dealers "unable to meet demand for popular models." The beige book found that both production and orders are up at factories and said, "Manufacturing activity appears to have accelerated in almost every district." While the Richmond district reported "some moderation" in growth, the Kansas City Fed said plants there are "experiencing their highest capacity utilization levels in a year." The Fed said "resurgent Asian demand is contributing to this rise in activity" in a number of areas. In labor markets, the beige book described the situation as "unchanged. The demand for labor continues to outstrip the readily available supply of labor in most areas." While "a few districts have noticed a slight easing of labor market tightness," the beige book said reports from most districts found "widespread labor shortages." Specifically, retailers in Boston, Kansas City and New York, manufacturers in Boston and St. Louis and construction companies in other districts reported being unable to hire workers. Demand at temporary employment agencies "remains on the upswing" in several districts, the report added. Even so, "There are few reports of acceleration in nominal wages and salaries," the beige book said in summary. This was not universal, however, as district-by-district reports indicate. The Minneapolis, Philadelphia and Richmond Feds reported wages at manufacturing firms have been "picking up," and the Boston and Minneapolis Feds said wages at retail establishments have been growing between 3% and 5%. The Kansas City Fed reported that retailers there are "feeling increased wage pressures." Likewise, the Cleveland and Dallas districts noted "accelerating wage growth." The Atlanta and Minneapolis districts reported "sharp increases in the employer costs of health-care benefits." More generally, the beige book cited evidence of "a substantial upswing in the cost of health-care benefits." Price pressures were also found to be largely under control, although again this was not uniformly the case. "While pressures at the consumer level remain mostly calm, numerous districts report significant increases in some materials prices," the beige book said. The report said "The majority of district reports indicate that price pressures at the retail level are not readily apparent. Where they are apparent, they are categorized as temperate." "Price pressures at the wholesale level appear to be somewhat greater," the beige book added. Accelerating prices for steel, raw materials and construction materials were detected in a number of places. The Dallas Fed said construction costs are up 5% to 8%. On the other hand, the San Francisco Fed said prices for manufacturers' inputs have been "stable or declining." Accompanying strong economic activity, "loan demand, except for residential real estate loans, is well-sustained across districts," the beige book said. "Lending activity remains relatively strong."