Fed’s Latest “Beige Book” Highlights Good Economic News and Trade Worries

By at 13 September, 2018, 10:57 am

by Raymond J. Keating-

In the latest edition of its Beige Book, released on September 12, the Federal Reserve served up some generally good news on the state of the U.S. economy, with trade tensions creating uncertainty and concern.

The Beige Book takes a look at economic conditions in the nation’s 12 Federal Reserve districts using reports from Bank and branch directors, and interviews with business and community contacts, economists and other experts.

Some key points are worth highlighting:

•  “Reports from the Federal Reserve Districts suggested that the economy expanded at a moderate pace through the end of August. Dallas reported relatively brisk growth, while Philadelphia, St. Louis, and Kansas City indicated somewhat below average growth.”

•  “Employment grew modestly or moderately across most of the nation, though Dallas noted robust job growth, while three Districts reported little change that partly reflected a dearth of applicants. Six of the twelve Districts cited instances in which labor shortages were constraining sales or delaying projects.”

•  “Manufacturing activity grew at a moderate rate in most Districts, though St. Louis described business as little changed and Richmond reported a decline in activity.”

•  “Lending activity grew throughout the nation.”

•  “Businesses generally remained optimistic about the near-term outlook, though most Districts noted concern and uncertainty about trade tensions–particularly though not only among manufacturers. A number of Districts noted that such concerns had prompted some businesses to scale back or postpone capital investment.”

•  “All Districts noted fairly widespread input price pressures, particularly for construction materials and freight transportation. Tariffs were reported to be contributing to rising input costs, mainly for manufacturers.”

•  “Some Districts indicated that businesses were increasingly using benefits–such as vacation time, flexible schedules, and bonuses–to attract and retain workers, as well as putting more resources into training.”

Looking at these points, the overall economy and the policy climate, it’s clear that business tax reform and relief, and a lighter regulatory touch have been significant positives for the U.S. economy, boosting incentives for investment and generating additional economic growth. Current efforts in Congress, for example, to make permanent key aspects of the tax relief measure passed in December 2017 would serve as an additional plus.

The key policy problem at the federal level, as reflected in the Beige Book report, is imposing and threatening higher tariffs, along with retaliatory measures from other nations. This negotiating strategy is generating additional uncertainty, higher costs and reduced opportunity. A return to free trade policies would further boost investment, economic, income and employment growth.


Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP:  The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.


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