What We’re Hearing
The Atlanta Fed’s most recent Southeastern Insights reported an “increased level of apprehension regarding the pace of growth in the near term as a result of growing concerns over another damaging debt ceiling debate, heightened geopolitical risks, and uncertainties related to regulations and the Affordable Care Act.” The report provided a broad summary of economic intelligence gathered through our network of business contacts and other sources throughout region from August 1 to September 18.
Increasing apprehension about the economic outlook
Recently, we’ve had several opportunities to discuss the outlook with audiences in the region. Lesley McClure, the Atlanta Fed’s regional executive in the Birmingham Branch, gave a presentation to the Rotary Club of Dothan and to the National Business League in Birmingham. Lesley detected a slight increase in apprehension regarding the short-term outlook.
“I queried the audience on how many of them felt things would be the same or get better/ if business activity would increase in the next three to six months,” she said. “The vast majority expected things to stay the same and only a couple raised their hands expecting improvement.”
In Tifton, Georgia, Regional Economic Information Network (REIN) Director Laurel Graefe gave a presentation to the local Rotary Club. Much discussion took place about the federal government’s partial shutdown and what it means on a broader level. The audience wondered about the impact on employment and GDP and was uncertain about what the shutdown would mean for them and their businesses. There was some apprehension about what the current congressional impasse may mean for the bigger discussion of the debt-ceiling limit.
Galina Alexeenko, REIN director at the Nashville Branch, recently gave a presentation to Middle Tennessee State University’s Small Business Development Center and found similar concern over the impact of the government shutdown and the potential economic impact of the government shutdown and failure to raise the debt limit.
I also fielded several questions about the impact of fiscal policy uncertainty in a recent talk in Atlanta and at a presentation to the Carrollton Rotary Club. Rising uncertainty was captured in several other indicators, including the Atlanta Fed’s poll of small businesses in the Southeast, as this recent macroblog post noted.
Questions on inflation
In Dothan, Lesley discussed inflation, which has been running below the Federal Open Market Committee’s target of 2 percent. After Lesley discussed this trend, one audience member asked, “How can you say inflation is low when I see rising prices at the grocery store?”
We get this question quite a bit, and we reply by explaining that inflation cannot be measured by an increase in the cost of one product or service, or even several products or services. Rather, inflation is a general increase in the overall price level of the goods and services in the economy. To read more about how the Fed evaluates inflation and its effects on the economy, see this explanation from the Board of Governors. To follow current trends in inflation indicators, check out the Atlanta Fed’s Inflation Project.
Price developments were also on the minds of my audience in Carrollton and at the Tifton event. The Tifton area has a large concentration of agricultural activity, cotton in particular, and Laurel spent a good deal of time discussing whether and how the Fed’s current accommodative monetary policy stance was affecting agricultural commodity prices and commodity prices more generally. Like Lesley, Laurel discussed recent inflation trends and added that increases in the prices of crude oil, food, and other commodities have proven temporary and can best be explained by the fundamentals of global supply and demand rather than by the stance of U.S. monetary policy. For a deeper discussion of this issue, see this speech by Janet Yellen, the vice chair of the Federal Reserve Board of Governors.
Apprehension about the economic outlook can be attributed to the notable rise in uncertainty we have detected in recent discussion with several audiences. We’ll continue to reach out to our business contacts to determine if this results in a pullback in overall economic activity.
By Mike Chriszt, a vice president in the Atlanta Fed's public affairs department
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