Beige Book Disappoints Somewhat - October 19, 2011
The Federal Reserve Board earlier this afternoon issued its Beige Book summary of Current Economic Conditions across the country, formally known as the Beige Book. The Beige Book summarized business conditions in September across the 12 Federal Reserve Districts.
Essentially, the report indicated that aggregate economic activity had continued to expand in September. However, the report acknowledged that a number of the Districts described the pace of growth as modest or slight in the latest month, while contacts chronicled observed that weaker or less certain outlooks for business conditions across much of the country seemed to be the rule. That is not an encouraging finding.
The report also noted that consumer spending, a metric that accounts for some two-thirds of overall economic output nationally, was up just slightly in most Districts, with auto sales, which have been strong for much of the year, and tourism leading the way. Business spending also increased somewhat nationally. However, many Districts also noted that there was restraint in hiring and in capital spending plans.
Hopefully, though, a few Districts noted that they had seen slight improvements in real estate and construction activity, two areas that have been dragging down the pace of aggregate business growth nationwide. Overall, though, conditions in both the construction and real estate areas remained weak on an absolute basis, even if there was some partial recovery. Such a finding would tend to agree with this morning's data on housing starts for September, issued by the Commerce Department, which showed a nice increase from August in building activity, but remained more than 70% below the record level of housing starts posted in January of 2006.
Also encouraging was the strength shown by energy and mining activity. Also, cost pressures eased in a number of Districts. That would be encouraging, save for the fact that lower costs pressures often are founded upon weakening economic activity.
On the whole, the report, which is used by the U.S. Federal Reserve as a tool for enacting monetary policy at the next FOMC meeting, which is set for November 1st and 2nd, was somewhat disappointing, but should not be regarded as much of a surprise, given the sluggish economic backdrop in most areas of the country.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.