Fed's Beige Book Signals Improving Prospects for Companies

The Federal Reserve said most of its districts signaled improving outlook for companies, according to the Beige book released Wednesday that outlines current economic conditions across the country.

"Overall, most Districts indicated that expectations of their firms for future growth were positive, had improved, or both," according to the Beige book, which is based on the Fed's recurring surveys of businesses, households and community organizations.Expectations of interest rate cuts by the Fed are also boosting the outlook of some of the respondents to the Fed's survey, helping somehow offset the impact of declining manufacturing activity.

While the districts noted that high borrowing costs were limiting auto sales and real estate sales, "the prospect of falling interest rates was cited by numerous contacts in various sectors as a source of optimism," the Beige book read.

Seven districts cited little or no net change in overall employment levels, while the pace of job growth was described as modest or moderate in four districts, according to the document.

The Fed has been closely monitoring developments in the labor market as competition for workers have boosted wage growth, adding to upward pressure on inflation. Moderating job growth may help strengthen the case for interest rate cuts, after policymakers boosted borrowing costs at the fastest pace in decades to slow the surge in consumer prices.

"Nearly all districts cited one or more signs of a cooling labor market such as larger applicant pools, lower turnover rates, more selective hiring by firms and easing wage pressures," the book read.