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Highlights
The Beige Book prepared for the September 12-13 FOMC meeting appears to be modestly more positive. The Beige Book stated that economic activity "continued to expand gradually" in July and early August across most regions and sectors. This compares to the language in the prior Beige Book of "continued to expand at a modest to moderate pace." The latest summary phrase might be considered neutral relative to the prior, but details are a little more positive.
Six Districts described their economic activity as experiencing modest growth; five as moderate; two as slower; and one as mixed.
Highlights included that retail sales increased slightly in most Districts with strength noted in auto sales. Sales of big-ticket household goods were strong in several Districts.
Probably the biggest positive was in real estate-both for residential and commercial.
"All District housing market reports were largely positive as sales and construction levels increased and home inventories declined. Rental markets continued to strengthen with rising rents being reported in Boston, New York, Atlanta, Chicago, and Dallas. Commercial real estate leasing and construction continued to improve as demand for multifamily units increased in Atlanta, Chicago, and San Francisco. However, both New York and Richmond noted a slowdown in commercial activity, while Philadelphia and Dallas held steady."
A big concern about the recovery has been lack of growth in lending. But today's Beige Book reports some improvement. There was mixed news on industrial and commercial lending but most Districts reported an increase in mortgage lending. Several Districts observed steady-to-increasing demand for consumer credit, especially for auto loans.
A negative was a slowing in manufacturing.
"Manufacturing continued to expand in June and early July in most Districts, but at a more modest pace compared with earlier in the year. Several Districts reported that new orders had moderated since the last report, but the Philadelphia, St. Louis, and Kansas City Districts were more optimistic that new orders would rebound. The Philadelphia and Richmond Districts however, reported declines in shipments and orders."
The labor market is still seen as sluggish with the Beige Book describing employment growth as "tepid." Beige Book contacts often cited U.S. fiscal policy uncertainty or weak demand as the reason for being conservative about hiring.
Wage pressures were described as "minimal." But there were notable increases for highly skilled workers in information technology, health care, transportation, some professional services, and highly skilled manufacturing workers. Price inflation was modest across most areas of the country.
Today's report is slightly net positive compared to the prior Beige Book. However, there is not enough improvement to rule out that the Fed might engage in additional easing in the near future. Traders are still awaiting Fed Chairman Ben Bernanke's speech on Friday that the Kansas City Fed' internal Fed symposium at Jackson Hole, Wyoming for further hints on the next policy move.
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