December hike still likely after latest from Fed: CIBC

The economy grew at a moderate or modest pace this summer in eight of the Federal Reserve’s 12 U.S. districts, a slowdown from previous reports that may make Fed policymakers more cautious about an interest rate hike.

The Fed’s Beige Book survey of business conditions found that growth slowed in two districts — Philadelphia and Richmond. The economy was unchanged in New York and Kansas City. In its last report in July, growth was modest or moderate in 11 of 12 districts.

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“While activity in the twelve regions was slightly more mixed than the last release, most regions are still reporting growth in the modest to moderate range,” writes Royce Mendes of CIBC Economics in a note to analysts.

The Fed report comes after Friday’s jobs figures showed that hiring slowed in August to half the pace seen in June and July. And a business survey found that manufacturing activity actually shrank last month. Such readings likely darken the outlook for most Fed officials.

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But, “consumer spending is still moving ahead, with wage pressures increasing further during the interim period,” notes Mendes. “Manufacturing was also notable in that the Beige Book’s description of activity rising slightly is in contrast to the most recent ISM Manufacturing Index reading, which dropped below the 50 mark.”

“Qualitative assessments in the Fed’s Beige Book still suggest the economy is moving in the right direction,” says Mendes. He affirmed that even with the new information, CIBC economists predict the Fed will raise its key interest rate this December.

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Staff, with files from The Associated Press

The Associated Press is an American not-for-profit news agency headquartered in New York City.