The Beige Book Report for October
Have you ever heard of the Beige Book? It is a report that is compiled based on data from each of the twelve Federal Reserve Banks. The current economic conditions of each district are gathered from a variety of local sources, such as market experts, key business contacts, and economists. The report is published eight times a year. Each time, one Federal Reserve Bank is responsible for collecting all of the data and publishing the report (on a rotating basis). This issue of the Beige Book (released on October 17, 2007) was prepared at the Federal Reserve Bank of Dallas.
Here are some highlights from the report:
While some retail sales increased, growth in consumer spending softened slightly. Department and discount stores, furniture stores, and apparel stores showed a weakening in sales, while electronics and luxury sales remained solid.
Manufacturing growth has dampened due to the declining in the output of products used in home construction. Strong growth was otherwise reported for other materials such as paper, agricultural machinery, and health related equipment.
It is no surprise that real estate is still doing poorly. High inventory of unsold new homes remains, declines in home sales continued, and builders have lessened the construction on new residential property. The commercial property market remained stable, and Manhattan showed a sizable increase in office space rental. Rental rates across the country for business use were stable with some increase.
There continues to be difficulty in the banking and financing market as delinquencies increase. Lenders have tightened credit standards, and consumer lending grew slowly. Mortgages, equity lines and refinancing declined across the districts.
Most of the country has experienced above average crop yields due to favorable weather conditions. The demand for agricultural goods remained high. Several areas experienced some difficulties due to drought, including Alabama, Kentucky, and Virginia.
The labor market is relatively tight. Temporary staffing firms reported increases in hiring. Low-skilled, entry-level workers are in short supply, particularly in retail and hospitality industries.
Energy and raw material costs are high overall. Declines in the dollar value along with high shipping costs have raised the cost of imports. Prices are lower in the cost of vehicles, wood, and some metals.
Critics complain about the ambiguity of the economic outlook. The mixture of positive and negative news leaves it unclear as to whether or not rates will be cut further. With continued economic uncertainty in several aspects of the outlook, it is anyone’s guess as to what action the Federal Reserve Board will take next. With the next Federal Open Market Committee meeting less than two weeks away, investors and economists are awaiting some sign as to what the Fed is planning. It could go either way at this point, so all we can do it wait.
