Beige Book: Activity Slowed In About A Third Of The Country

FOMC published Beige Book which shows that,  during the reporting period of September through early October, activity slowed in about a third of the country mainly because of an increase in uncertainty due to the federal government shutdown and debt ceiling debate.

 

A few excerpts from the Fed classified by theme:

 

1/ Sum up
- Reports from the twelve Federal Reserve Districts suggest that national economic activity continued to expand at a modest to moderate pace during the reporting period of September through early October. Eight Districts reported similar growth rates in economic activity as during the previous reporting period, while growth slowed some in the Philadelphia, Richmond, Chicago, and Kansas City Districts. Contacts across Districts generally remained cautiously optimistic in their outlook for future economic activity, although many also noted an increase in uncertainty due largely to the federal government shutdown and debt ceiling debate.
 
2/ Consumption
- Consumer spending grew modestly in most Districts. Auto sales continued to be strong, particularly in the New York District where they were said to be increasingly robust. Growth in retail sales was steady in most of the Districts, but picked up some in Cleveland and Richmond and slowed in Chicago, Kansas City, and Dallas. Contacts in Chicago and Atlanta noted that back-to-school spending was lower than a year ago. However, retailers generally remained optimistic about the holiday shopping season.
 
3/ Manufacturing
- Overall, manufacturing activity expanded modestly in September, but with some notable exceptions among the Districts
 
4/ Nonfinancial Services
- Demand for nonfinancial services increased modestly from the prior reporting period.
 
5/ Real Estate and Construction
- Construction and real estate activity continued to improve in September.
- Residential construction increased moderately on balance, growing at a stronger pace in the Minneapolis and Dallas Districts but only slightly in Richmond and Philadelphia.
- Multifamily construction remained stronger than single-family construction in a number of Districts.
- Nonresidential construction activity remained modest, but varied by market and District.
 
6/ Banking and Finance
- Financial conditions were little changed on balance from the prior reporting period.
- Overall loan growth remained modest in most Districts.
- Consumer loan demand weakened slightly.
- Reports on mortgage lending were mixed.
 
7/ Employment and wages
- Employment growth remained modest in September. Several Districts reported that contacts were cautious to expand payrolls, citing uncertainty surrounding the implementation of the Affordable Care Act and fiscal policy more generally.
 
8/ Inflation
- Price pressures remained limited in September. Most Districts reported only slight increases in commodity prices and limited ability to pass through these increases to their customers.

 

My view
 
It shows little change from last report. The pace of growth remains historically weak as it keeps on expanding at a modest to moderate rate. However, activity slowed in about a third of the country. Employment growth remains modest due to uncertainty surrounding the implementation of the Affordable Care Act and fiscal policy more generally, while inflation stays subdued. On the positive side, we can note that real estate activity continued to improve and in the meantime consumer spending grew modestly.