Beckner: Beige Book Hints More Signs Inflation Picking Up

18 January 2018

17th January 2018

By Steven K. Beckner

The Federal Reserve's survey of economic conditions in its 12 districts through Jan. 8 suggests a further progression toward rising inflation pressures -- lending anecdotal support to statistical evidence on faster wage-price increases. Nothing dramatic, mind you. The Nov. 29 beige book said, "price pressures have strengthened since the last report" and that "most Districts reported modest to moderate growth in selling prices and moderate increases in non-labor input costs." The Jan. 17 beige book, which will be reviewed at the Jan. 30-31 Federal Open Market Committee meeting, simply says, "most Districts reported modest to moderate price growth since the last report..." But in a significant change, the latest survey, summarized by the Atlanta Federal Reserve Bank, found "firms in some Districts noted an ability to increase selling prices." There were also somewhat stronger nuances on wages in the latest beige book. "Most Districts said that wages increased at a modest pace," but "a few Districts observed that firms were raising wages in a broader range of industries and positions since the previous report." And "some Districts reported that firms expect wages to increase in the months ahead." By contrast, the November survey found "wage growth was modest or moderate in most Districts," with wage increases "most notable for professional, technical, and production positions that remain difficult to fill." The last report said, "many Districts reported that employers were raising wages as well as increasing their use of signing bonuses and other non-wage benefits to retain or attract employees." The findings follow faster December increases in consumer prices and average hourly earnings. Meanwhile, inflation expectations keep creeping up. The New York Fed's latest survey found "median inflation expectations at the three-year horizon increased from 2.8% in November to 2.9% in December, while at the one-year horizon they rose from 2.6% to 2.8%." The five-year/five year forward inflation expectation rate, which measures expected inflation in the second half of the 10-year period, fell from 281 basis points at the beginning of 2014 to 141 last June, but has since climbed to 210 as of Jan. 12, according to the St. Louis Fed.