Beige Book: strong labor market condition - Nomura

Analysts at Nomura explained that following Chair Yellen’s semiannual testimony, there were few surprises from the Fed Beige Book prepared for the July FOMC meeting.

Key Quotes:

"It reported slight to moderate growth, a tone that appears slightly cautious compared with that from the previous print, which described growth as modest to moderate. However, many districts expect modest to moderate gains in the months ahead, implying the medium-term outlook remains the same."

"Remarks on the auto sector highlighted softer auto sales, but do not signal a drastic deterioration."

"Half of the districts noted declines in auto sales, suggesting a broad-based slowdown across regions. In particular, the Philadelphia Fed reported softer demand for autos, while the New York Fed reported improved sales in upstate New York."

"The Chicago Fed reported auto production declined slightly, but remained at a solid pace. On inflation, modest gains in prices were reported in the majority of districts, although a few noted a slight easing in price pressures. Higher construction material costs were reported by some districts, while gasoline prices trended lower and agricultural prices remained subdued."

"Remarks on employment reiterated strong labor market conditions, with employment across most districts maintaining a modest to moderate pace of expansion. The Beige Book repeated that labor markets continue to tighten with contacts in many industries reporting a shortage of qualified workers."