The Fed’s Beige Book, more formally called the Summary of Commentary on Current Economic Conditions, is a report published by the Federal Reserve Board eight times a year. The report is published in advance of meetings of the Federal Open Market Committee. Each report is a gathering of “anecdotal information on current economic conditions” by each Federal Reserve Bank in its district from “Bank and Branch directors and interviews with key business contacts, economists, market experts, and others.”
The latest Beige Book was published earlier this week and was upbeat overall. Each of the 12 Federal Reserve Banks reported modest to moderate economic growth in their Districts. This report led some analysts to predict that the weaker than expected jobs report last Friday, and the higher than expected unemployment claims announced yesterday, may be only a temporary setback. We’ll see.
Here is the Summary of the latest Beige Book from the Fed:
“Reports from the twelve Federal Reserve Districts indicated that the economy continued to expand at a modest to moderate pace from mid-February through late March. Activity in the Boston, Atlanta, Chicago, Dallas, and San Francisco Districts grew at a moderate pace, while Cleveland and St. Louis cited modest growth. New York reported that economic growth picked up somewhat. Philadelphia and Richmond cited improving business conditions. The economy in Minneapolis grew at a solid pace and Kansas City’s economy expanded at a faster pace.
Manufacturing continued to expand in most Districts, with gains noted in automotive and high-technology industries. Manufacturers in many Districts expressed optimism about near-term growth prospects, but they are somewhat concerned about rising petroleum prices. Demand for professional business services showed modest to strong growth and freight volume was mainly higher.
Reports on retail spending were positive, with the unusually warm weather being credited for boosting sales in several Districts. While the near-term outlook for household spending was encouraging, contacts in several Districts expressed concerns that rising gas prices could limit discretionary spending in the months to come.
New-vehicle sales were reported as strong or strengthening across much of the United States. Tourism increased in most reporting Districts. Residential real estate showed some improvement, with many contacts citing expansion in the construction of multi-family housing. Activity in nonresidential real estate increased or held steady in most Districts.
Agricultural conditions were generally favorable. Mining activity expanded and oil extraction rose, while natural gas drilling slowed. Banking conditions were largely stable, with some improvement seen in loan demand. Several Districts reported increased credit quality.
Hiring was steady or showed a modest increase across many Districts. Difficulty finding qualified workers, especially for high-skilled positions, was frequently reported. Upward pressure on wages was constrained. Overall price inflation was modest. However, contacts in many Districts commented on rising transportation costs due to higher fuel prices.”
While the latest Fed survey is decidedly upbeat, not all the economic news of late has been positive. On Thursday, the Labor Department said that unemployment benefit applications jumped 13,000 last week to 380,000. That was well above pre-report estimates. And what most people didn’t see was that the DOL revised the previous week’s number by another 10,000 – so the real rate of new unemployment applications jumped 23,000 on Thursday.
That followed last week’s unemployment report which saw a modest decline to 8.2% last month. But the downside in the report was that employers added over 120,000 jobs in March, or about half the pace of the previous three months.
April has been a roller-coaster ride in the stock markets so far. Concerns that the Fed is not going to do QE3 weighed on stocks, as did new concerns about the European debt crisis. I’ve written extensively on both of these topics in recent weeks and months.
I still don’t think QE3 is off the table, especially if the 1Q GDP report on April 27 is weaker than expected. And as I have maintained all along, the European debt crisis never went away. European monetary leaders merely kicked the can down the road in December with bailout loans to the major banks. “Down the road” now only means a few months, apparently.
I will analyze the European situation in more detail in my E-Letter on Tuesday. Stay tuned.
Have a great weekend everyone!
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