• Consumer spending “showed improvement” across most districts, although several districts noted that consumers remained “value conscious,” choosing to focus on necessities rather than “big ticket” items. Expectations for the holiday shopping season were positive across districts, with several anticipating higher sales than last year.
• Manufacturing activity continued to expand in most districts, with only New York reporting that activity had weakened. Fairly strong growth was seen in metal fabrication and automotive industries.
• Housing markets remain depressed, with several districts reporting further weakening during the reporting period. One district noted that high inventories of unsold homes “continued to be a drag” on construction and prices. In the commercial real estate sector, several districts reported flat demand and high vacancy rates, resulting in limited non-residential construction activity.
• Lending activity was generally reported as “steady or unchanged,” although a few districts noted a slight improvement. Credit quality was generally noted to be improving with districts reporting declines in delinquencies.
• With respect to labour markets, the report noted that the hiring activity “showed some improvement” across most districts, although employers continue to wait for more evidence of expanding business prospects and maintain a preference toward part-time and temporary workers. Wage pressures remain subdued across all districts.
• Prices of final goods and services were “fairly stable” across the districts despite rising input costs (particularly agricultural commodities, metals and fuel). Companies in several districts reported a limited ability to pass through these higher costs to customers given “the relative softness in demand.”

Today’s Beige Book report provides anecdotal evidence of the continued improvement in the U.S. economy. Consumer spending, the largest contributor to real GDP, is showing improvements heading into the holiday season and the manufacturing sector continues to be a source of strength. With that said, today’s report indicates that hiring, while showing some improvement, continues to be fairly limited and prices pressures continue to remain subdued. Given this backdrop, we do not expect the Fed to make any changes to its highly accommodative monetary policy stance at its upcoming meeting as it works to support the continued recovery and ensure that inflation returns to levels that are consistent with the Fed’s mandate.

Information contained in this report has been prepared by the Economics Department of RBC Financial Group based on information obtained from sources considered to be reliable. While every effort has been made to ensure accuracy and completeness, RBC Financial Group makes no such representation or warranty, express or implied. This report is for information purposes only and does not constitute an offer to sell or a solicitation to buy securities.

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