The latest Federal Reserve Summary of Commentary on Current Economic Conditions (Beige Book), stated that activity continued to expand across most regions through mid-November, although the pace varied. A few Districts noted political uncertainty as weighing on activity both before and after the election.
A majority of Districts reported higher retail sales, although there was some softening in vehicle sales.
Demand for manufacturing products was mixed with a strong dollar cited as a headwind while most Districts reported stronger growth in services.
Residential real estate activity improved in most Districts and commercial activity expanded in many areas.
Tightening labour markets were reported in seven of the 12 Districts compared with 11 in the previous report with modest employment growth on balance.
Wages growth was also described as modest while there was slight overall upward pressure on prices.
The latest Beige Book release will not have an impact on the December FOMC meeting as the Fed has already decided to raise rates unless there is a major adverse event within the next two weeks.
Markets will be looking ahead for evidence on likely trends for 2017 and inflation expectations will have a crucial role. In this context, the wages and pricing data is the most important element within the release.
In this context, the Beige Book will not provide any additional ammunition for the more hawkish voices on the FOMC, especially with no obvious evidence of significant upward pressure on prices. The report increases the potential for a relatively dovish hike in December.