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Beige Book Again Sees Modest to Moderate Growth

Citing improvements in manufacturing, tourism, commercial and residential real estate and in the financial sector, the Federal Reserve Wednesday said the nation's economy ""continued to increase at a modest to moderate pace"" from late May through early July. The assessment in the periodic ""Beige Book"":http://federalreserve.gov/monetarypolicy/beigebook/files/Beigebook_20130717.pdf was tempered by ""mixed"" conditions in the agricultural sector and the absence of improvement in labor markets. ""Hiring,"" the Beige Book said, ""held steady or increased at a measured pace.""


While manufacturing was a bright spot in the economy, reported to be on the rise in all 12 Federal Reserve districts except Kansas City, ""persistent drought conditions"" affected farm output in regions from Kansas City to San Francisco and Dallas. On the other hand, ""extremely wet conditions delayed planting and even resulted in some farmers in the Richmond and Minneapolis Districts planting soybeans instead of corn,"" and ""excessive rains in the Richmond District also damaged the wheat crop in some areas.

The Beige Book, formally the ""Summary of Commentary on Current Economic Conditions by Federal Reserve District,"" is issued eight times a year, about two weeks before each meeting of the Federal Open Market Committee (FOMC), the Federal Reserve's policy setting arm. The FOMC's next meeting is scheduled for July 30-31.

Residential real estate activity, according to the Beige Book, ""increased at a moderate to strong pace in most Districts"" and ""most Districts reported increases in home sales.""

Home prices, the Beige Book said, ""increased throughout the majority of the reporting Districts,"" with Boston, New York, Richmond, Atlanta, Minneapolis, Kansas City, and Dallas noting ""low or declining home inventories and upward pressures on home prices in some areas."" Residential construction activity, the Beige Book said, ""also improved moderately across the Districts.""

The report said ""commercial real estate market conditions continued to improve across most Districts with ""modest to moderate improvements in non-residential real estate activity in New York, Philadelphia, Cleveland, Atlanta, Chicago, St. Louis, Minneapolis, and San Francisco. Dallas, the Beige Book said, ""reported strong growth in leasing activity for office and industrial space,"" and ""Boston and Richmond reported that commercial real estate conditions were holding steady or improving.""

Banking conditions were also said to have improved during the report period, and the Beige Book said, ""some bankers in the Cleveland, Chicago, and Dallas Districts noted competitive pressures to reduce loan pricing."" According to the report, ""bankers in the Philadelphia, Richmond, Cleveland, Atlanta, and Chicago Districts noted a shift toward new home mortgages and away from refinancing (which was led, in part, by increases in interest rates).""

Here's a brief district-by-district recap of the Wednesday's Beige Book:

Boston: ""Economic activity in the First [Boston] District continues to expand at a moderate pace ... retailers, tourism contacts, manufacturers and consulting and advertising contacts all report modest increases in sales ... most businesses…Contacts generally expect the recent trend of moderate growth to continue.""

New York: ""Economic activity in the Second [New York] District ... continued to expand moderately ... Manufacturers indicate that input price pressures have abated ... whereas service sector contacts report that they remain fairly widespread ... labor market conditions continue to improve


gradually…commercial and residential real estate markets have continued to firm throughout the region ... bankers report mixed but generally steady loan demand ... further declines in delinquency rates.""

Philadelphia: Aggregate business activity in the Third [Philadelphia] District maintained an overall moderate pace of growth ... auto sales accelerated to a strong rate of growth, lending firmed up to a modest rate of growth, and manufacturing activity appear to have grown slightly ... growth rate of residential construction, existing home sales, and general services continued at a moderate pace.""

Cleveland: The economy in the Fourth [Cleveland] District expanded at a moderate pace ... manufacturing orders and production were steady or higher ... the momentum ... in residential construction since the beginning of the year has slowed, but activity remains above year-ago levels ... hiring picked up in manufacturing and residential construction ... wage pressures remain contained.""

Richmond: ""[Richmond] District economic activity strengthened moderately ... manufacturing shipments and new orders increased ... consumer spending firmed ... demand rose for new residential mortgage lending ... residential real estate sales and construction increased, with speculative building returning to some areas the effect of continued heavy rainfall on agriculture was mixed, slowing planting or damaging some crops while bolstering others.""

Atlanta: ""Reports from Sixth [Atlanta] District business contacts indicated that economic activity expanded at a modest pace ... the outlook for the rest of the year remains optimistic ... hospitality sector continued to experience strong demand ... brokers and homebuilders reported increases in sales and prices, and declining home inventories ... loan demand remained stable for residential real estate.""

Chicago: ""Economic activity in the Seventh [Chicago] District expanded at a moderate pace ... contacts remained cautiously optimistic ... manufacturing production increased as did construction, led by continued improvement in the residential sector ... credit conditions tightened moderately.""

St. Louis: ""The economy of the Eighth [St. Louis] District has expanded at a moderate pace ... residential real estate market conditions have continued to improve, and commercial real estate markets have also improved ... total lending at a sample of small and midsized District banks increased from mid-March to mid-June.""

Minneapolis: ""Ninth [Minneapolis] District economy showed signs of moderate growth ... increased activity was noted in consumer spending, professional services, manufacturing and energy. Tourism-related activities slowed in May ... commercial construction and real estate grew moderately fast, while residential construction and real estate grew at a robust pace.""

Kansas City: ""Tenth [Kansas City] District economy grew modestly in June ... expectations for future activity improved slightly ... tourism and restaurant sales edged up, while retail and automobile sales were steady ... manufacturers reported slowdowns in production and shipments ... residential real estate activity continued to be strong, while commercial real estate activity marginally increased.""

Dallas: ""Eleventh [Dallas] District economy generally expanded at a slightly stronger pace…manufacturing activity increased somewhat overall, with stronger reports from metals and petrochemical producers ... retail sales were flat after rising in the previous six weeks ... nonfinancial services firms noted a continued ... housing sector continued to improve ... drought continued to dampen the agricultural sector.""

San Francisco: ""Economic activity in the Twelfth [San Francisco] District expanded at a modest pace ... inflation was minimal ... wage pressures were mostly muted ... retail sales overall grew modestly ... although demand for business and consumer services was mixed ... demand for housing strengthened, and commercial real estate activity trended up further.""

_Hear Mark Lieberman this Friday on P.O.T.U.S. Radio, Sirius-XM 124, at 6:20 a.m. and again at 1 p.m. Eastern._

About Author: Mark Lieberman

Mark Lieberman is the former Senior Economist at Fox Business Network. He is now Managing Director and Senior Economist at Economics Analytics Research. He can be heard each Friday on The Morning Briefing on POTUS on Sirius-XM Radio 124.

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