U.S. Federal Reserve Beige Book

Ksenia Bushmeneva, Economist | 416-308-7392

Date Published: January 15th, 2020

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Beige Book suggests the U.S. economy ended the year on solid footing 

  • Today's Beige Book showed that economic activity increased at a modest pace across Federal Reserve Districts in the final six weeks of 2019, unchanged relative to the previous reporting period. The report also stated that tariffs and trade uncertainty continued to weigh on some businesses.  
  • Activity in the manufacturing sector was flat, unchanged relative to the previous period. Transportation activity was characterized as weaker-to-flat. Non-financial services fared better, with activity growing at a modest pace.  
  • The residential rental market appears to have strengthened. However, activity in the resale market cooled off a bit relative to the previous period. Home sales were reported as flat overall, with some Districts suggesting that a low inventory of houses on the market was restraining sales. New residential construction continued to expand moderately. 
  • Labor markets remained tight across the nation, with labor shortages said to be restraining job growth and, in some cases, business expansion. Overall demand for labor remained brisk in most industries, with the exception of manufacturing. There were also some reports of job cuts in transportation and energy sectors. Wage growth was characterized as modest-to-moderate, unchanged from the previous reporting period. 
  • Consumer spending grew at a modest-to-moderate pace, with solid holiday sales. Vehicle sales increased moderately, while tourism activity strengthened in the eastern seaboard Districts, but was mixed elsewhere.  
  • Inflation remained in check, with prices and input costs rising at a modest pace. A few Districts noted that businesses in retail and construction sectors were passing along tariff increases to consumers.   

Key Implications

  • The final Beige Book of 2019 suggested that, despite some soft spots, the U.S. economy had ended the year on solid footing. Indeed, even though the housing market might have lost some steam and manufacturing activity was soft, consumer spending remained robust and the services sector continued to hum along. Our latest tracking suggests the U.S. GDP is on course to expand by 2.5% (annualized) in the fourth quarter of 2019. 
  • Consumers have been a bright spot for the economy in 2019, which is not surprising given that the labor market posted solid gains last year. Even with reports of a tight labor market, employment grew by 1.6% for the year as a whole, only a slight deceleration from a 1.7% pace in 2018. All in all, a low unemployment environment and solid wage gains provide a decent backdrop for consumer spending heading into 2020. As outlined in our recent forecast, we expect the consumer to once again be a key driver of growth this year. 
  • With the U.S. and China signing a first-stage trade deal today, business sentiment may improve in 2020, assuming trade tensions don't flare up with other trading partners.