Nine out of 12 districts report flat or declining activity
The Federal Reserve’s latest Beige Book survey of conditions across the country continued to paint a weak picture, with nine out of 12 regional district banks reporting flat or a slight decline in activity.
Most districts reported declining manufacturing activity and consumers were reported to be on the hunt for bargains.
Housing activity continued to expand across the country, but uncertainty about the path of mortgage rates was keeping some homeowners on the sidelines.
The Beige Book is designed to give Fed officials a feel for conditions on the ground ahead of their next interest-rate policy meeting, set for Nov. 6-7.
Recent Beige Books have painted a weak picture and economists are a bit puzzled.
Analysts at LHMeyer, an independent monetary-policy research firm, noticed 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 for September “sounded downright grim,” Fed officials told their colleagues that “their business contacts were optimistic about the economic outlook, though they were exercising caution in their hiring and investment decisions.”
“Given that Chair Powell has indicated that Fed officials are placing increased importance on the Beige Book and other anecdotal readings, the soft readings provide reason for the Fed to continue to ease monetary policy,” Bostjancic added.
The grim nature of the Beige Book reports hasn’t been matched by national economic data.
For instance, retail sales were stronger than expected in September, and the U.S. economy added 254,000 jobs in the month.
After all, the Atlanta Fed’s GDPNow tracking estimate sees the economy accelerating in the July-September quarter above the prior quarter’s 3% annual growth rate.
According to the latest Beige Book, employment did increase slightly and layoffs remained limited. Wages continued to rise “at a modest to moderate pace.”
The survey said that inflation continued to cool in most districts. Prices of some food products, like eggs and dairy, did rise sharply.
Consumers were seen as increasingly sensitive to high prices.
“In contrast to the sturdy employment and retail-sales reports for September, the anecdotal readings from Fed’s Beige Book depict little economic growth across much of the country,” said Kathy Bostjancic, chief economist at Nationwide.
Most economists continue to expect the Fed will cut rates by a quarter percentage point at their next meeting.
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