Washington, DC, June 14, 2006--The economy continued to expand in most regions of the country in May and early June, but there are signs of a slowdown, the Federal Reserve said Wednesday in the Beige Book report on economic conditions.
Price pressures were rising in most regions, the Fed said. Wage pressures were said to be moderate.
"Economic activity continued to expand" in all 12 Federal Reserve districts, "but there were signs of deceleration," the Beige Book said.
In most regions, the economy could be summed up simply as "Healthy, but ..."
Activity moderated in four districts: Atlanta, Kansas City, Richmond and San Francisco. Growth accelerated in the Philadelphia district. Other areas reported steady growth, although business contacts in New York expressed concerns about the outlook for the second half of the year.
The Beige Book was compiled by the professional staff at the Dallas Federal Reserve Bank from information received from thousands of business contacts around the nation. The Beige Book is prepared to guide Fed officials in their deliberations about interest rates on June 28 and 29; it does not represent the views of any Fed official.
"Concerns about high or rising costs were expressed by business contacts across the country," the Beige Book said.
"Reports of costs being passed forward varied considerably but were more prevalent than in the last Beige Book," the report said. Nonetheless, the report said there were few reports that "these increases were reaching the retail level."
Cost pressures were mounting for manufacturers, but only three districts -- Boston, Dallas and Philadelphia -- reported any success in firms raising retail prices. Five regions -- Chicago, Cleveland, Kansas City, New York and San Francisco -- reported little change in retail prices. In Richmond, retail price pressures were decelerating.
Labor markets were tightening, but wages were said to be rising only modestly except in a few occupations where demand far exceeds supply.
Signs of a slowdown abounded in the report.
"Consumer spending continued to increase, but district reports suggest that the growth rate slowed," the report said. Sales were slowing in Dallas and Richmond, and were down in St. Louis.
Residential real estate markets continued to cool across much of the country," the report said. Commercial real estate activity, by contrast, strengthened.
Slower home sales were seen in 10 districts. Only Dallas and Richmond reported continued strong sales. Home building slowed in most regions.
Even reports of strength were hedged. "The manufacturing sector continued to expand quite strongly, but with more reports of softening," the Fed said.
Production in the energy, semiconductor and aerospace industries was strong. Weaker sectors included autos and agricultural equipment manufacturing. Slower demand for construction materials was noted in most regions, except in hurricane zones in Atlanta and Dallas.
Manufacturing was said to be slowing in Philadelphia and Richmond. Factory activity was mixed in Atlanta.
Most service industries reported healthy growth.
