Beige Book: Modest, Moderate Growth Continues
Eight times a year, all of the 12 Reserve Banks gather anecdotal information on current economic conditions in their districts through reports from Bank and branch directors as well as interviews with key business contacts, economists, market experts, and other sources. Then, approximately two weeks prior to each Federal Open Market Committee meeting, results are published in the Beige Book on the Federal Reserve Board of Governors' website.
Because the lead sentence—of the national summary and each region's section—often gives a broad view of economic conditions in that region, that first sentence often gets much attention. Here is a roundup of the first sentences of these sections:
- National: Reports from the twelve Federal Reserve Districts suggest that national economic activity continued to expand at a modest to moderate pace during the reporting period of early July through late August.
- Boston: Economic activity in the First District continued to expand at a modest pace.
- New York: Economic growth in the Second District has continued at a moderate pace since the last report.
- Philadelphia: Aggregate business activity in the Third District continued at a moderate pace of growth during this current Beige Book period.
- Cleveland: Business activity in the Fourth District expanded at a moderate pace since our last report.
- Richmond: Economic conditions in the Fifth District improved moderately since our last report.
- Atlanta: According to reports from Sixth District contacts, economic conditions modestly improved from July to mid-August.
- Chicago: The pace of economic activity in the Seventh District improved in July and August, and contacts generally expected moderate growth for the rest of the year.
- St. Louis: The economy of the Eighth District has expanded at a moderate pace since the previous report.
- Minneapolis: The Ninth District economy grew at a moderate pace since the last report.
- Kansas City: The Tenth District economy expanded moderately in July and early August with further gains anticipated during the coming months.
- Dallas: The Eleventh District economy expanded at a moderate pace over the past six weeks.
- San Francisco: Economic activity in the Twelfth District expanded at a modest pace during the reporting period of early July through late August.
You have no doubt detected a pattern. Here are some highlights from the Atlanta Fed's portion of the Beige Book:
- The region’s pace of payroll growth improved with gains concentrated in Georgia and Florida. On balance, firms were hesitant in hiring new staff due to various uncertainties, with healthcare reform mentioned most frequently. Similarly, in recent polls, contacts expressed a clear preference for investing in capital expenditures to improve efficiencies and reduce costs rather than hiring additional labor.
- Growth in input costs was muted for most businesses as price inflation for crude and intermediate materials remained relatively subdued. Businesses continued to note tight margins and very little pricing power. Wage pressures were largely subdued, except for industries where workers are in short supply, such as information technology and specialized construction.
Consumer spending and tourism
- District retailers indicated that sales rose slightly from July to late-August. Reports described consumers as remaining cost conscious. Automotive dealers noted that year-end projections are being revised up as truck sales strengthen mostly from contractors purchasing vehicles again. Hospitality contacts continued to witness strong travel and tourism activity this summer.
Real estate and construction
- District brokers and homebuilders continued to report that existing home sales and prices remained ahead of last year's level. When polled about rising mortgage rates, nearly half of broker respondents said that rising rates were having a negative impact on their business while the majority of builders said that rising rates were not having an impact on their business. Low inventory levels continued to put upward pressure on home prices in many submarkets across the District. Commercial construction activity was described as flat to slightly up from earlier this year with apartment development dominating activity.
- While the majority of the region’s manufacturers cited expanding activity, the pace of growth decreased from July to mid-August. New orders and production experienced modest decreases which contributed to the slowing of activity. However, a number of firms, especially those in the auto sector, continued to report solid demand for their products. When asked about their outlook, one-third of regional purchasing managers expect higher production over the next three to six months.
Banking and finance
- Banking contacts did not witness any noticeable increase in overall lending as most borrowers had already taken advantage of lower rates. However, the recent uptick in rates did motivate many businesses to move to lock-in rates through refinancing. Some bankers also reported a pickup in loan volume for lending products such as second mortgages, credit cards, auto lending, and commercial lending.
The next Beige Book will be published October 16.
By Mike Chriszt, a vice president in the Atlanta Fed’s public affairs department
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