Fed Report Generally Positive about Economy, South Carolina Analysis
Monday, December 4th, 2017
There’s more positive news about the U.S. economy, courtesy of the Fed.
The Federal Reserve recently issued one of its periodic Beige Book reports, which gives a sampling of economic conditions from the 12 Federal Reserve Bank districts around the country. The Nov. 29 edition reported “modest to moderate” economic expansion in recent weeks, continued manufacturing and employment growth, and an optimistic outlook toward holiday retail sales.
The findings didn’t surprise Dr. Frank Hefner, director of the Office of Economic Analysis at the College of Charleston.
“The Beige Book is added confirmation of what people have been reporting all year long,” he said.
Nationally, the report also found continued tightness in the labor market, flat residential real estate activity and slight growth in non-residential real estate.
South Carolina is part of the Fed’s Richmond district, which includes, Maryland, North Carolina, Virginia and West Virginia. Looking specifically at that district, the Fed said, “manufacturers noted a moderate rise in new orders and shipments, and they generally expected strong growth over the next six months.”
Ports in the district were busy, the Fed reported, as were trucking companies, which benefited from shipments related to hurricane relief.
The S.C. Ports Authority reported its strongest October ever. Volume is up 5 percent for the Port’s fiscal year, which began in July.
“It will continue to grow, both on the export side and the import side,” Hefner predicted.
Hefner said he could attest to a busy trucking industry, thanks to a recent trip down Interstate 81 in Virginia, which was packed with 18-wheelers.
“In a declining economy, you just don’t get that kind of truck traffic,” he said.
The tourism industry stayed busy, too, according to the report. Hefner said to pay attention to new extended-stay hotel construction, as those types of hotel guests tend to be business-related.
In real estate, the Fed reported a slight rise in home sales in the district despite low inventories and a slow pace of new homes being built. Commercial real estate was slightly stronger.
All real estate markets are local, and Hefner said Charleston’s is “robust” right now.
“In general, the housing market is doing fairly well,” he said.
The demand for labor rose in the district in recent weeks, according to the Fed.
“Executives noted difficulty finding skilled mechanics, electricians, engineers, information technology specialists, hospitality workers, nurses, truck drivers, construction managers and construction workers,” it reported. “Additionally, retailers had difficulties finding extra seasonal help.”
Despite that, retailers in the district shared the national optimism toward holiday sales.
Economists typically expect wages to rise in a tight labor market, but the report found only modest increases. Hefner said it’s a complicated equation, giving the example of a 10-person small business that is struggling to find an additional employee.
“Can you just increase his wage?” he asks of the hypothetical new worker. “Or do you have to increase everyone else’s wage? That gets to be pretty expensive.”
The Beige Book data was reinforced by a report from the federal Bureau of Economic Analysis released the same day. The BEA revised its estimate of real gross domestic product upward to 3.3 percent for the third quarter of 2017.
The BEA had originally estimated real GDP at 3 percent. In the second quarter, it rose by 3.1 percent. Real GDP is GDP adjusted for inflation/deflation.
“The increase in real GDP reflected increases in consumer spending, inventory investment, business investment, and exports,” the BEA reported.