The Federal Reserve’s latest Beige Book survey of conditions across the country continued to paint a weak picture, with nine of the 12 regional district banks reporting flat business or a slight decline. Most districts reported a drop in manufacturing activity and a notable search by consumers for “deals.”
Housing activity continued to expand across the country, but uncertainty about the path of mortgage rates is keeping some homeowners on the sidelines. The Beige Book is designed to give Fed officials insight into conditions on the ground ahead of its next interest rate policy meeting, scheduled for Nov. 6-7.
Notably, the recent Beige Books paint a weak picture and economists are a bit baffled.
How analysts reacted
Analysts at LHMeyer, an independent monetary policy research firm, noted that there was a disconnect in September between what the Beige Book reported and how officials actually described conditions during their closed-door meeting.
While the Beige Book of September “It sounded downright gloomy.”, Fed officials told colleagues that “their business contacts were optimistic about the economic outlook, although they were exercising caution in their hiring and investment decisions.”
The gloomy nature of the Beige Book reports has not been matched by national economic data. For example, retail sales were stronger than expected in September, and the US economy added 254,000 jobs in the month.
After all, the Federal Reserve Bank of Atlanta’s tracking GDP estimate sees the economy accelerating in the July-September quarter, above the quarter’s 3% annual growth rate. former.
According to the latest Beige Book, Employment did increase slightly and layoffs remained limited. Wages continued to rise “at a moderate to modest pace.” The survey indicated that Inflation continued to cool in most districts. Prices of some food products, such as eggs and dairy, increased dramatically.
Consumers were also perceived to be increasingly sensitive to high prices. “In contrast to September’s strong jobs and retail sales reports, anecdotal readings from the Fed’s Beige Book show little economic growth across much of the country,” said Kathy Bostjancic, chief economist at Nationwide.
Most economists continue to expect the Fed to cut rates by a quarter percentage point at its next meeting.
“Given that Chairman Powell has indicated that Fed officials are placing greater weight on the Beige Book and other anecdotal readings, the soft readings provide reasons for the Fed to continue easing monetary policy,” Bostjancic added.
What is the Beige Book?
The “Beige Book” is a report published by the United States Federal Reserve that provides a qualitative analysis of economic conditions in the twelve districts of the Fed. It is compiled from interviews with businessmen, economists and other market players, and is published every eight weeks, shortly before the meetings of the Federal Open Market Committee (FOMC).
Its objective is to offer Fed officials a detailed and up-to-date view of the economy in different regions, addressing aspects such as economic activity, employment, inflation and consumption. Although not based on quantitative data, the anecdotal observations collected in the report help inform monetary policy decisions.
Source: Ambito
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