U.S. Federal Reserve Beige Book

Ksenia Bushmeneva, Economist | 416-308-7392

Date Published: November 27, 2019

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Beige Book continues to paint a picture of modest economic growth 

  • Today's Beige Book showed that economic activity increased at a modest pace across Federal Reserve Districts in October through mid-November, unchanged relative to the previous reporting period.  
  • The manufacturing sector registered a slight improvement, with more Districts reporting expanding activity relative to the prior period, however, the majority continued to report lack of growth in factory output. Given the softness in manufacturing, activity in the transportation sector was also mixed. Other nonfinancial services industries continued to fare well, with most Districts reporting modest-to-moderate growth. The banking sector reported a slightly slower pace of loan growth. 
  • The labor market continued to add jobs overall, with exception of manufacturing, retail and wholesale trade, where hiring was mixed, and with some reports of layoffs. Outside of these industries, competition for workers remained stiff. The vast majority of Districts continued to cite tight labor market conditions, and difficulty filling positions. This was boosting wage growth across most industries, but it has intensified for low-skilled positions.  
  • Consumer spending was stable or growing moderately, with increases in auto sales and tourism activity reported in several Districts. 
  • Housing market performance has improved somewhat relative to the previous period. The pickup in residential construction was more broad-based, home sales, meanwhile, were reported to be either flat or increasing.
  • Inflation remained tame, with prices rising at a modest pace over the reporting period. One exception was retailers, who mentioned higher costs with some contacts attributing them to tariffs. Firms' ability to pass price increases on to consumers remained limited, but companies affected by tariffs were more likely to pass cost increases. 

Key Implications

  • There were few surprises in today's Beige Book, which largely reaffirmed developments seen elsewhere in the data. Domestic economic activity continues to expand at a modest pace, supported by robust consumer spending and a pickup in residential construction, amid ongoing weakness in the manufacturing sector. All in all, economic growth is not falling off the cliff but is also not something to write home about.
  • Consumers have been a bright spot for the economy so far, but their resiliency may be tested in the coming months. Consumer confidence has declined for four consecutive months, and with retailers citing rising costs, sticker prices may begin creeping higher as well, particularly if the December 15th tariffs go ahead as planned.