Although the Federal Reserve’s Beige Book (Summary of Commentary on Current Economic Conditions by Federal Reserve District) released on Wednesday Dec. 4 used the words modest or moderate seven times in its three-paragraph introduction, Miller Tabak’s Chief Economic Strategist Andrew Wilkinson saw signs of more robust optimism.
Wilkinson noted that despite the cautious introduction, “Several pages in to the Beige Book leaves us concluding what we felt was indeed the emerging trend: Namely, the economy is rebounding from behind the fog of both sequestration (mild impact) and government shutdown (seen as temporary).”
He added, “The report appears to convey a firmer tone …, there appears no denying from the broad thrust of the report that the economy is in robust form. Things are improving even if to some people the improvement is mercurial.”
The optimism may be putting a December taper back on the table. Especially with Wednesday’s positive trade balance and October new home sales numbers (up 25.4%). The market rallied sharply on the good news then tanked midday, which could be a sign the positive outlook put taper back in the picture, though the S&P recovered to end the day slightly higher.
Beige Book - December 4, 2013
Prepared at the Federal Reserve Bank of Cleveland and based on information collected on or before November 22, 2013. This document summarizes comments received from business and other contacts outside the Federal Reserve and is not a commentary on the views of Federal Reserve officials.
Reports from the twelve Federal Reserve Districts indicated that the economy continued to expand at a modest to moderate pace from early October through mid-November. Activity in the New York, Cleveland, Richmond, Atlanta, St. Louis, Minneapolis, and Dallas Districts grew at a moderate pace, while Philadelphia, Chicago, Kansas City, and San Francisco cited modest growth. Boston reported that economic activity continued to expand.
Manufacturing activity continued to expand in most Districts, with gains noted in the motor-vehicle and high-technology industries. Manufacturers in many Districts expressed optimism about near-term growth prospects. Demand for professional business services experienced stable to moderate growth, especially in computer technologies. Freight volume showed signs of strengthening. Reports on retail spending were positive. Looking forward to the holiday shopping season, retailers reported being hopeful, but cautious. Sales of new motor vehicles were reported as moderate to strong across much of the United States. Tourism increased in most reporting Districts, although the federal government shutdown had a negative impact in some areas. Residential real estate activity improved across many Districts, with multifamily construction experiencing moderate to strong growth. Some slowing in single-family home sales was attributed to seasonal factors. Activity in nonresidential real estate was stable or improved slightly across many Districts. Agricultural conditions were generally favorable. Mining activity was mixed, while natural gas production increased. Banking conditions were largely stable, with some improvement seen in loan demand. Several Districts reported an easing of lending standards.
Hiring showed a modest increase or was unchanged across Districts. Difficulty with finding qualified workers, especially for high-skilled positions, was frequently reported. Upward pressure on wages and overall price inflation were contained. Contacts in many Districts voiced concern about future cost increases attributable to the Affordable Care Act and other types of federal regulation.
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