The “Beige Book” is a compilation of informal soundings of business conditions in each of the 12 Federal Reserve Districts, which are referenced by the name of their headquarters cities. The latest Beige Book (https://www.federalreserve.gov/monetarypolicy/beige-book-default.htm), issued July 18, is based on information collected from late May 21 through July 9 and included these comments relevant to construction:
U.S. Summary: Economic activity continued to expand across the United States, with 10 of the 12 Federal Reserve Districts reporting moderate or modest growth. The outliers were the Dallas District, which reported strong growth driven in part by the energy sector, and the St. Louis District where growth was described as slight….Labor markets were described as tight, with most Districts reporting firms had difficulty finding qualified labor. Shortages were cited across a wide range of occupations, including highly skilled engineers, specialized construction and manufacturing workers, IT professionals, and truck drivers; some Districts indicated labor shortages were constraining growth. Districts noted firms were adding work hours, strengthening retention efforts, partnering with local schools, and converting temporary workers to permanent, as well as raising compensation to attract and retain employees….The prices of key inputs rose further, including fuel, construction materials, freight, and metals; a few Districts described these input price pressures as elevated or strong. Tariffs contributed to the increases for metals and lumber.
Fourth District:
Summary of Economic Activity
Business activity in the Fourth District grew moderately during the survey period. Demand was strong in many sectors, but hiring continued at about the same pace as in the previous survey period as a dearth of qualified workers constrained hiring. Wages rose moderately, and increases were in line with recent trends. Upward pressure on input costs was strong, notably for fuel and metals. Contacts widely attributed the cost increases to import tariffs. However, final selling prices rose only moderately. Firms raised their prices to cover, at least partially, their increased raw materials and transportation costs. Otherwise, businesses were cautious about raising their selling prices. Consumer demand, including for autos, was stable to slightly higher. Manufacturing capacity utilization rose to meet strong demand, but a number of producers remarked that they were struggling to keep up with orders. Freight volumes trended higher. Construction activity remained strong.
Employment and Wages
…Hiring was strongest among construction firms thanks to high project volumes….Contacts reported the dearth of qualified workers constrained hiring across an array of occupations. The problem was most often highlighted by manufacturing, construction, and transportation companies….A nonresidential builder noticed that worker turnover was somewhat higher than normal. Despite tightness in the overall job market, wage pressures remained consistent with recent trends in the District. In general, employers raised wages moderately as part of cost-of-living increases or annual merit raises or to fulfill union contracts.
Prices
Upward pressure on input costs remained strong, especially for fuel and metals. Manufacturers and builders commented widely that import tariffs were lifting steel and aluminum prices. In some cases, manufacturers noted a rush to purchase metals in anticipation of additional price increases. To a lesser extent, construction contacts also noted lumber price increases.
Manufacturing
…An industrial metals producer cited strong demand from the construction sector. Some manufacturers noted that capacity utilization had risen to meet demand and that a few contacts mentioned they struggled to keep up with orders. Contacts remarked that concerns about future trade- and inflation-related price increases had prompted some customers to accelerate purchases.
Real Estate and Construction
…Nonresidential builders noted that the strong demand of recent periods continued in the current period and that backlogs ticked higher as firms struggled with labor constraints. Capital investment plans were mostly unchanged, although one commercial builder stated that the firm boosted spending to use drones for surveying to make up for the shortage of workers. Most contacts expected the current momentum in customer demand to continue in the near term. However, there was some concern that demand from industrial clients could weaken depending on the course taken by trade disputes.
