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posted on 02 March 2016

March 2016 Beige Book: Reading Between The Lines - The Economy Slowed.

Written by Steven Hansen

The consolidated economic report from the 12 Federal Reserve Districts (Beige Book) "indicate that economic activity expanded in most Districts since the previous Beige Book report". The previous report said "indicated that economic activity has expanded in nine [of 12] of the Districts since the previous Beige Book report". My interpretation is that the Fed is saying the rate of economic expansion has slowed again - but are saying the USA is not in a recession.

Please see the end of this post for words the Federal Reserve uses when the economy is entering a recession.

This report is based on information collected on or before 22 February 2016. The summary for this 02 March 2016 release reads as follows:

Reports from the twelve Federal Reserve Districts continued to indicate that economic activity expanded in most Districts since the previous Beige Book report. Economic growth increased moderately in Richmond and San Francisco and at a modest pace in Cleveland, Atlanta, Chicago, and Minneapolis. Philadelphia reported a slight increase in economic activity, and St. Louis described conditions as mixed. Most contacts in Boston cited higher sales or revenues than a year-ago but mixed results since the previous month. New York and Dallas described economic activity as flat, and Kansas City noted a modest decline in activity. Across the nation, business contacts were generally optimistic about future economic growth.

Consumer spending increased in the majority of Districts, although Kansas City and Dallas noted some weakness. Auto sales were mixed, but remained at elevated levels in most Districts. Tourism activity strengthened in most reporting Districts.

Nonfinancial services activity grew slightly since the previous report, and demand for staffing services moved higher. Transportation activity was mixed, with weakness in the energy and agriculture sectors and lower export volumes limiting gains.

Overall, manufacturing activity was flat, although conditions varied considerably across Districts. Most Districts noted that weak demand from the energy sector was creating a significant headwind for manufacturers, although contacts in San Francisco mentioned that low energy costs had reduced production costs for steel products. Many Districts reported that the strengthening dollar and weakening global outlook had negatively affected international exports.

Residential real estate sales rose in most Districts since the last report, and home inventories were low in the majority of Districts. Residential construction activity strengthened, as several Districts noted strong growth in multifamily construction. Nonresidential real estate sales also picked up, on net, although sales ranged from flat to strong across all Districts.

In the banking and finance sector, most Districts reported slight to modest increases in loan demand, stable credit quality and unchanged credit standards.

Agricultural economic conditions were flat to down moderately, as low commodity prices and weak global demand continued to put downward pressure on farm income. The energy sector contracted further since the last report due to lower coal production and additional declines in the oil and gas industry.

Labor market conditions continued to improve, with the majority of Districts reporting modest gains. Wage growth varied considerably, from flat to strong, across all Districts, and most Districts reported that consumer prices held steady.

Click the "source" hyperlink below to read the full report.

The Beige Book is a summary of current economic conditions:

Commonly known as the Beige Book, this report is published eight times per year. Each Federal Reserve Bank gathers anecdotal information on current economic conditions in its District through reports from Bank and Branch directors and interviews with key business contacts, economists, market experts, and other sources. The Beige Book summarizes this information by District and sector. An overall summary of the twelve district reports is prepared by a designated Federal Reserve Bank on a rotating basis.

Fed's Words When Economy is entering a Recession

For the December 2007 recession, here is the lead up summary words from the Beige Books:

  • 28Nov2007 - "expanding"
  • 16Jan2008 - "increasing moderately"
  • 05Mar2008 - "growth slowed"
  • 16Apr2008 - "weakened"

For the March 2001 recession which ended in November 2001, here are the Beige Book summary words:

  • 17Jan2001 - "economic growth slowed"
  • 07Mar2001 - "sluggish to modest economic growth"
  • 02May2001 - "slow pace of economic activity"
  • 13Jun2001 - "little changed or decelerating"
  • 08Aug2001 - "slow growth or lateral movement"
  • 19Sep2001 - "sluggish"
  • 24Oct2001 - "weak economic activity"
  • 28Nov2001 - "remained soft"
  • 16Jan2002 - "remained weak"

Source: Federal Reserve



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