Fed's Beige Book Points to Slowing Economy
Fed’s latest Beige Book, released yesterday, pointed to slowing growth (but still positive growth) across many economic sectors and regions. On a region by region basis, the Fed found that Fed districts nearest the Atlantic seaboard were most affected by the economic slowdown while other districts such as the Atlanta District and the Dallas District felt their growth less impeded.
The report did find a recent boost in manufacturing activity, lending, and commercial real estate. However, other industries experienced a flattening effect. Although falling gasoline prices have encouraged more shopping trips and an overall pickup in consumption, price pressure from supplier inputs such as energy, cotton, and food has continued to reduce retail margins. Auto sales have shown little improvement, residential real estate sales remain stagnant, and labor market conditions have stayed soft.
The weather patterns of the last month have also adversely affected agricultural sectors. Drought has lowered crop yields in the Atlanta, Dallas, San Francisco, and Kansas City Districts while flooding has forced millions of acres to go unplanted in the Minneapolis and Chicago Districts.
While the economy continues to grow, this past month has seen that growth abated. While most factors are out of the control of policymakers, one of the hindrances of growth certainly is not: uncertainty over the debt ceiling and our fiscal future. One way to jump start investment and continue our path to a full economic recovery is for Washington’s leaders to raise the debt ceiling and adopt a credible comprehensive fiscal plan that reduces debt as a share of the economy. Such a plan would boost global confidence in our nation’s economic health and vibrancy, and would create substantial budgetary and economic benefits down the road. With the August 2nd deadline getting nearer by the hour, and with markets paying close attention to it, the time for a deal is now. With an economy that is already experiencing a slowdown, defaulting or delaying a debt deal merely exacerbates the problem.