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  • Scott Poore, AIF, AWMA, APMA

Economic Growth Continues To Slow

In a shorter-than-normal week, the biggest piece of news out of the economic data was the Federal Reserve’s Beige Book. The report is an amalgamation of data received from the 12 Federal Reserve banks located in various regions of the country.

The most recent report showed “slight to modest” economic activity versus the previous report that showed “moderate” economic activity. The details of the report also showed a slowdown in the consumer as higher prices are causing a change in spending choices. The Beige Book also showed weakness in the housing market due to higher prices and rising mortgage rates. Companies surveyed in the report described their biggest challenges as difficulty in hiring workers (#1) and supply chain disruptions (#2). This was verified in the still lofty Job Openings (more than 11 million) and the disappointing Private Payrolls number (+128,000 versus +300,000 expected).

Total Vehicle sales disappointed as consumers once willing to wait on delivery delays are now shifting away from discretionary items. The consumer has not thrown in the towel yet, meaning that the economic engine that is the majority of U.S. GDP is still operating, but Factory Orders and Manufacturing data are slowing. This week’s report on May inflation (CPI) could give further resolve for the Fed to continue raising rates as the report is expected to show a month-over-month increase—again.

Some of the first evidence of vacation activity is coming in and the news is not stellar.

While on vacation last week, I noticed the beach condos were not as full for the Memorial Day weekend as in previous years and vacationers were bringing their own supplies (food & drinks) to the beach rather than pay higher prices at the pool bar/restaurant. In the Hamptons, one of the more predictable vacation staples for the wealthy, summer rentals are down. There is plenty of inventory for rent, but not enough renters. Rent prices in the 1st quarter fell 26% and some owners are cutting prices by 30% just to fill their properties.

The next concern this summer will be restaurants.

Across the country, restaurants are feeling the pressure of a tight labor market and minimum wage increases. To tackle this, owners are passing along the pain in the form of various fees. Itemized fees such as "noncash adjustment," "fuel surcharge," and "temporary inflation fee" are showing up on restaurant receipts. This could further affect consumer behavior this summer.


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