Market CommentariesThe Beige Book Sees Steady Economic Growth and Moderate Inflation

The Beige Book, a Federal Reserve publication about current economic conditions across the nation's 12 Federal Reserve Districts, which is used by central bank economists to assess the overall direction and pace of business change, was released a bit earlier this afternoon and found that the economy had continued to expand from late November to the end of 2017.

Overall, this summation concluded that the economy was growing at a modest to moderate pace, save for the Dallas District, which saw strong increases in activity. Moreover, the outlook for 2018 remained positive. The economy's late-2017 strength was driven by better-than-expected holiday retail sales.

The news was not as compelling in the auto sector, where demand was mixed. Residential real estate activity also was constrained due to the absence of sufficient inventory. Nonresidential construction activity continued to experience slight improvement. Also, many manufacturers were increasing their capital spending.

Meantime, most Federal Reserve Districts reported modest to moderate price growth in this survey, with some Districts seeing increases in manufacturing, construction, and transportation input costs. In addition, employment expenses continued to grow at a modest pace since the report was last published six weeks ago.

Looked at in its entirety, there were few surprises in this latest survey by the Fed. As such, we still expect no more than three interest rate hikes this year to be voted in by the lead bank. The stock market, up sharply before the Beige Book release, continued to advance briskly, with the Dow Jones Industrial Average holding to a gain just north of 260 points on the day.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.