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Beige Book Signals Continued Economic Growth But Drop In Optimism

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Economic activity has continued to increase in most of the U.S., according to the Federal Reserve's Beige Book released Wednesday afternoon, although the report also hinted at a deterioration in optimism.

The Beige Book, a compilation of anecdotal evidence on economic conditions in the twelve Fed districts, said eight of the twelve districts reported modest to moderate growth.

With several districts reporting more holiday traffic compared with last year, the report said non-auto retail sales grew modestly, while auto sales were flat.

While the Fed said most districts indicated a continued expansion in manufacturing, the pace of growth slowed, particularly in the auto and energy sectors.

The central bank also said new home construction, existing home sales, and commercial real estate activity were all little changed.

Looking at the labor market, the Beige Book said employment increased across most of the country, with a plurality of districts reporting modest growth.

All districts noted that labor markets were tight and that firms were struggling to find workers at any skill level, the Fed said.

The report also said most districts reported modest to moderate increases in prices, although reports were mixed on whether firms could pass higher input costs on to customers.

In addition to rising materials and freight prices, a number of districts also said higher tariffs were a factory in cost increases.

Looking ahead, the Beige Book said outlooks generally remained positive, but many districts reported that contacts had become less optimistic.

The drop in optimism reflected increased financial market volatility, rising short-term interest rates, falling energy prices, and elevated trade and political uncertainty.

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