February 2012 Fed Beige Book: Economy Expanding Modest and Moderate

Econintersect: The consolidated economic report from the 12 Federal Reserve Districts (Beige Book) says economic activity “continued to increase at a modest to moderate pace in January and early February 2012”. These are good anti-recession words – please see the end of this post for words the Federal Reserve uses when the economy is entering a recession. Last month’s Beige Book said economic activity “increased at a slow to moderate pace“.

Even though it is not clear whether “continued to increase at a modest to moderate pace” is better than “ a slow to moderate pace“, all Federal Reserve districts used positive words to describe their respective economies.

The summary for the 29 November 2012 release reads as follows:

Reports from the twelve Federal Reserve Districts suggest that overall economic activity continued to increase at a modest to moderate pace in January and early February. Activity expanded at a moderate pace in the Cleveland, Chicago, Kansas City, Dallas, and San Francisco Districts. St. Louis noted a modest pace of growth and Minneapolis characterized the pace of growth as firm. Economic activity rose at a somewhat faster pace in the Philadelphia and Atlanta Districts, while the New York District noted a somewhat slower pace of expansion. The Boston and Richmond Districts, in turn, noted that economic activity expanded or improved in most sectors.

Manufacturing continued to expand at a steady pace across the nation, with many Districts reporting increases in new orders, shipments, or production and several Districts indicating gains in capital spending, especially in auto-related industries. Activity in nonfinancial services industries remained stable or increased. Reports of consumer spending were generally positive except for sales of seasonal items, and the sales outlook for the near future was mostly optimistic. Tourism remained strong in some reporting Districts, but declined in the Minneapolis and Kansas City Districts because of reduced snowfall. Residential real estate market conditions improved somewhat in most Districts, with several reports of increased home sales and some reports of increased construction. Commercial real estate markets also showed positive results in some Districts. Banking conditions generally improved across the Districts. Agricultural conditions were mixed, while extraction activity generally increased.

Hiring increased slightly across several Districts, and contacts in a variety of industries faced difficulties finding skilled workers. Wage pressures were generally contained, and prices of final goods remained stable, although contacts in some Districts anticipate passing rising input prices through to consumer prices.

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”

Steven Hansen

Source: Federal Reserve