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Atlanta Fed’s Beige Book shows an increase in regional economic activity

Eight times per year, each Federal Reserve Bank gathers anecdotal information on current economic conditions in its district through reports from Reserve Bank and branch directors and interviews with key business contacts, economists, market experts, and other sources. Results are published in the Beige Book on the Federal Reserve Board of Governors website. The Atlanta Fed's Regional Economic Information Network (REIN) provides a robust platform for compiling our Reserve Bank's contribution to the Beige Book.

We tend to see the our Beige Book exercise as a touch point for the middle of the Federal Open Market Committee's cycle, where we bring the intelligence gathered by our regional executives and other sources to our staff economists and Atlanta Fed President Dennis Lockhart. It helps inform our forecast for broader U.S. economic activity and gives President Lockhart the latest input from business and community leaders throughout the Southeast.

The latest Beige Book was published February 29. The opening sentence to the Atlanta Fed's latest Beige Book reads:

"Sixth District business contacts described economic activity as expanding at a somewhat stronger pace in January and early February compared with late last year. Expectations were generally more positive, although firms continued to express caution with regard to the outlook."

Importantly, the rising pace of economic activity in the region should not be viewed as evidence that the economy here is taking off. It is performing better, but it would be a mistake to interpret this improvement as a sign that the economy is firing on all cylinders. Our outlook is still rather tame.

President Lockhart noted this in his February 14 speech at New College of Florida in Sarasota:

"Not all the recent economic news has been uniformly positive, but the balance of incoming data has been rather upbeat. This gives me confidence in the view that economic growth in 2012 will be noticeably better than in 2011."

He continued:

"Significant unanticipated developments are part of economic life, but barring shocks, we at the Federal Reserve Bank of Atlanta expect 2.5 to 3 percent growth for 2012."

Fed Chairman Ben Bernanke struck a similar tone in the February 29 Monetary Policy Report to Congress:

"Looking ahead, growth is likely to be modest during the coming year, as several factors appear likely to continue to restrain activity, including restricted access to credit for many households and small businesses, the still-depressed housing market, tight fiscal policy at all levels of government, and some slowing in global economic growth."

Our overall take from the region, based on the incoming data from the Southeast and what our business contacts are telling us, leads us to believe that the economy is gaining some traction and that this momentum should carry forward through 2012 and result in continued, modest increases in economic activity. Caution regarding the outlook was clear. While concerns about a potential spillover from financial events in Europe appear to have subsided, there was growing unease regarding the impact of rising gasoline prices.

Below are sector overviews from the Sixth District's Beige Book:

  • Retailers noted that sales and traffic increased compared with a year ago and auto sales remained robust. Hospitality contacts, with the exception of cruise lines, reported strong bookings for this year.
  • Homebuilders and brokers reported that unseasonably warm weather has helped bolster residential real estate activity by pulling some activity forward. Nonetheless, overall home sales and construction levels remained weak apart from the generally robust multifamily sector.
  • Manufacturers and transportation contacts continued to note positive activity on balance.
  • Bankers reported a modest improvement in loan activity at larger institutions.
  • More firms reported increased hiring, although contacts continued to signal they approached hiring decisions very cautiously.
  • Concerns over increased input costs generally eased as most firms reported that input prices leveled off. Only a few contacts reported having significant pricing power.
  • Contacts in the energy exploration sector noted that recent lease auctions have helped stimulate more industry optimism, contributing to an improvement in investment conditions.
  • Agriculture sector contacts reported that some farmers in Alabama and Georgia were reviewing their planting plans in light of their concerns of labor shortages.

Photo of Michael Chriszt By Mike Chriszt, an assistant vice president in the Atlanta Fed's research department

March 2, 2012 in Beige Book , Outlook | Permalink


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