Fed's Beige Book Remains Positive & Ignores Most Recent Weakness

The Beige Book released today from May sounds a bit out to lunch.  Maybe it is because the data is old, but the general trend here is more positive than negative.  While none of it is robust, it certainly is not the gloom and doom we have been used to seeing in the last two weeks.

Here is the district-by-district report: “Activity in the New York, Cleveland, Atlanta, Chicago, Kansas City, Dallas, and San Francisco Districts was characterized as growing at a moderate pace, while the Richmond, St. Louis, and Minneapolis Districts noted modest growth. Boston reported steady growth, and the Philadelphia District indicated that the pace of expansion had slowed slightly since the previous Beige Book.”

We would note that this report was prepared at the Federal Reserve Bank of Dallas and it was based entirely on information collected on or before May 25, 2012.  That is not quite two weeks old from today, but it is long before the jobs data hit and it did not have the foresight for the bad economic releases we saw throughout last week.  If you look through the summary alone, it feels like the Fed officials and the respondents offering opinions were a bit out to lunch.  The report’s general growth feel shows up here in the sector-by-sector comments:

• Manufacturing continued to expand in most Districts.
• Consumer spending was unchanged or up modestly.
• New vehicle sales remained strong and inventories of some popular models were tight; sales of used automobiles held steady.
• Travel and tourism expanded, boosted by both the business and leisure segments.
• Demand for nonfinancial services was generally stable to slightly higher since the last report, and several Districts noted strong growth in information technology services.
• Conditions in residential and commercial real estate improved.
• Construction picked up in many areas of the country.
• Lenders in most Districts noted an improvement in loan demand and credit conditions. Agricultural conditions generally improved, and spring planting was well ahead of its normal pace in most reporting Districts.
• Energy production and exploration continued to expand, except for coal producers who noted a slight slowing in activity.
• Wage pressures overall were modest.
• Hiring was steady or increased slightly, and contacts in a number of Districts reported difficulties in finding qualified workers, particularly those with specialized skills.
• Price inflation remained modest across Districts, and overall cost pressures eased as the price of energy inputs declined.
• Economic outlooks remain positive, but contacts were slightly more guarded in their optimism.

The full BEIGE BOOK is here and it shows much more detail on each of these points.