Fed’s latest ‘beige book’ paints more upbeat picture of economy
WASHINGTON — For all the gloom-and-doom economic news of late, there’s little indication of trouble in the Federal Reserve’s latest “beige book” report.
In fact, the Fed’s survey of its 12 banking regions, covering the period from early April to late May, paints a surprisingly upbeat picture of a U.S. economy continuing to improve at a moderate pace. Manufacturing in most areas is seen as expanding nicely, travel and tourism are strengthening, and the long-depressed housing market is showing more signs of recovery.
“Hiring was steady or showed a modest increase” since its previous beige book issued eight weeks ago, according to the summary of Wednesday’s report.
The positive tone of the beige book report could give Fed Chairman Ben S. Bernanke and his colleagues at the central bank one more reason to wait before pushing for another round of stimulus to spur growth. Bernanke’s own views on the economy — and the recent soft patch — will become clearer Thursday when he testifies before the Joint Economic Committee in Congress.
Calls have grown louder for Bernanke to do more after last Friday’s disappointing jobs report showing that employers added a measly 69,000 jobs in May and that the nation’s unemployment rate inched up to 8.2%. It was the third straight month of sluggish employment growth and added to other grim economic news recently from Europe, China, India and the U.S. that suggest global economic growth is faltering.
Besides the slowing job creation, other data — including softer car sales, rising jobless claims and weakening factory orders — point to a U.S. economy that has lost considerable momentum this spring.
But Wednesday’s report suggests that the economy may not be as bad as the recent string of economic data indicates.
“On the whole, this broadly uplifting report reinforces our view that the Fed is unlikely to announce additional monetary stimulus at their [next] meeting in two weeks’ time,” said Alistair Bentley, an economist at TD Bank, in a research note.
The beige book, a compilation of anecdotal reports from businesses, found most of the 12 regional economies growing at a “moderate” rate during the early April to late May period. Three Fed banking districts noted “modest” growth, and only one — the Philadelphia district — was seen as slowing since the previous beige book.
The Fed report showed no letup in manufacturing activity, despite the falloff in factory job growth last month. The report said auto production was “vibrant” in key car-making regions, while steel manufacturing remained “robust” and orders were growing for chip makers, high-tech equipment producers and aircraft and parts makers.
Construction activity, meanwhile, for both residential and commercial real estate improved in most districts. “Outlooks were positive overall,” the beige book said, “although there were a few reports of increased uncertainty from still unknown U.S. fiscal changes and Europe’s debt situation.”
Demand for the economy’s service-producing sector was described as “generally stable to slightly stronger since the previous report,” including growth in information technology services and healthcare. For most Fed districts, loan demand was “steady or slightly stronger,” but there was “slow improvement” in mortgage lending.
On employment, the report showed reports of hiring, most notably in manufacturing, construction, information technology and professional services — belying the overall grim picture of employment depicted in the Labor Department’s report Friday.
The only significant hint of a weakening job market in the survey came from the Fed’s Chicago district, where hiring was said to be “limited” — and that, in part, was because of difficulties finding qualified workers.
