Bridgewater Daily Observations - "The Fed's Beige Book is useful because it offers a broad and timely qualitative assessment of the US economy..."
The Fed's Beige Book is useful because it offers a broad and timely qualitative assessment of the US economy that acts as a complement to economic statistics and is less likely to be affected by short-term distortions. The most striking feature of Wednesday's report that covered the six weeks through May 24th was the lack of any major sources of weakness in the US economy. While growth was not cited as particularly strong in the report, every major segment of the US economy and all districts were described as expanding at least at a modest pace. In recent months the US economy as a whole has held up well despite a meaningful fiscal drag on growth of about 1.5% and weak external demand leading to roughly zero real export growth. Household spending remained healthy despite the recent tax hikes as households have been increasingly responding to stimulative conditions. And the Beige Book is another data point that suggests overall business conditions remain positive as well despite the weakness in external demand and the onset of the sequestration cuts. Going forward, the fiscal drag will begin to fade later this year, while financial conditions will likely remain stimulative enough to sustain moderate US growth.
Before walking through the underlying details of the Beige Book on a more granular level, the bullet points from the report below highlight the broad-based nature of the gradual improvement in US economic conditions.
* Economic activity increased at a modest to moderate pace across all Districts except for one District, which reported
* Most Districts noted slight to moderate gains in consumer spending and a moderate increase in vehicle sales.
* The manufacturing sector expanded in most Districts.
* Business services expanded and transportation traffic increased for producer, consumer and trade goods.
* Residential real estate and construction activity increased at a moderate to strong pace in all Districts.
* Commercial real estate and construction activity grew at a modest to moderate pace in most Districts.
* Overall bank lending increased.
* Hiring increased at a measured pace in several Districts, with some contacts noting difficulty finding qualified workers.
* Wage pressures remained contained overall, though several Districts reported a rise in wages for selected occupations.
* Districts reported level prices to mild price increases.
* Overall activity in the energy sector was flat, and mining was down.