Fed Beige book: Robust growth not on the horizon

The Fed's Beige Book, prepared by the San Francisco Fed and based on information collected prior to August 30th, noted that the economy continued to grow between mid-July and late August but that there were "widespread signs of a deceleration compared with preceding periods." Attached below are some key quotes from the most recent Beige Book:

On the economy

"Reports from the twelve Federal Reserve Districts suggested continued growth in national economic activity during the reporting period of mid-July through the end of August, but with widespread signs of a deceleration compared with preceding periods. Economic growth at a modest pace was the most common characterization of overall conditions."

Regional breakdown

"The reports from Boston and Cleveland also pointed to positive developments or net improvements compared with the previous reporting period. However, the remaining Districts of New York, Philadelphia, Richmond, Atlanta, and Chicago all highlighted mixed conditions or deceleration in overall economic activity."

On the consumer

"Consumer spending appeared to increase on balance despite continued consumer caution that limited nonessential purchases."

On inventories

"A few reports indicated that inventories for various goods remained near desired levels despite slower sales in some cases, as retailers have been practicing very tight inventory management."

On manufacturing

"Manufacturing activity expanded further on balance, although the pace of growth appeared to be slower than earlier in the year. Most Districts reported further gains in production activity and sales across a broad spectrum of manufacturing industries."

On residential real estate

"Activity in residential real estate markets declined further. Most District reports highlighted evidence of very low or declining home sales, which many attributed to a sustained lull following the expiration of the homebuyer tax credit at the end of June."

"Residential construction activity declined in most areas in response to weak demand."

On commercial real estate

"Demand for commercial, industrial, and retail space generally remained depressed. Vacancy rates stayed at elevated levels in general and rose further in a few Districts, placing substantial downward pressure on rents."

On lending

"Lending activity was stable to down slightly on net. Most Districts reported little or no change from existing low levels of commercial and industrial lending, as businesses remained quite cautious about expansion plans."

"Lending standards were largely unchanged."

On prices

"Upward price pressures were very limited during the reporting period, with the exception of selected food commodities and industrial materials."

On the labor market and wages

"Wage pressures remained modest overall. Of Districts commenting on wages, most identified little or no upward pressures or increases."

"Hiring of permanent employees was held down in part by employers' reliance on temporary and contract workers."

The entire Beige Book with detailed regional commentary can be viewed here:


The Fed's Beige Book is not a primary input into policy decisions and recent speeches, interviews, and media leaks provide more insight into the policymakers' views on the outlook than these anecdotal reports from the various regional Fed districts. However, the message of slower economic activity and moderate, uneven growth from the Beige Book corroborates the picture painted by many of the economic data releases. During the slowdowns seen in other recoveries, the Beige Book sent a similar message (for example, in 2002 the Beige Book noted "some tapering off in economic growth" and that "growth of economic activity has slowed").

In other words, we can't rule out double dip, but we can rule out robust growth.  It looks like housing and commercial real estate wll continue to fall.


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