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Beige Book reports 'modest' economic growth for late 2016

The Federal Reserve reported that the economy continued to expand at a "modest pace" across most regions from late November 2016 through the end of 2016.

Most of the 12 districts described the labor market as "tight" and reported "slight to moderate" unemployment, according to the latest Beige Book. Wages increased modestly across most districts, pushed up in some districts by increases in the states' minimum wages and higher wage pressures. Several districts reported that contacts expect labor markets to continue to tighten in 2017, with the pace of hiring expected to hold steady or increase.

Several of the districts, such as Kansas and Richmond, reported increased loan demand. Cleveland bankers reported that the district's lending pipelines are "relatively strong," but that there is little organic growth.

Residential and construction sales across the districts were described as "generally mixed." The San Francisco district saw strong activity in its housing market and moderate growth in overall lending activity.

Manufacturers across most districts noted increased sales, including some reporting a turnaround compared to earlier in 2016. Non-auto retail sales expanded in most districts, though a number of them noted disappointing holiday sales. E-commerce growth came at the expense of some brick-and-mortar retailers, according to the central bank. Selling prices were mixed among retailers, but overall were flat or down due to competitive discounting.

Growth across the energy industry was mixed. Two districts reported weakness in coal production, but others reported improvements in coal, oil or gas. Natural gas and coal prices increased, along with selected building and manufacturer materials. Agricultural commodity prices stayed flat or at very low levels.

Since the last report, the Fed reported that pricing pressure "intensified somewhat," with eight of the 12 districts reporting modest price increases, with increases in input costs more widespread than the increase in the price of final goods. The Atlanta district reported flat prices, and the remainder reported flat prices or slight increases.

Overall, the central bank reported that financial conditions were "stable" during the period, and firms across the country are "optimistic" about growth in 2017.