Fed Beige Book: “Modestly Favorable Across the Nation”

By at 16 January, 2020, 11:58 am

by Raymond J. Keating-

The U.S. economy grew at a pretty solid pace from the third quarter of 2017 to the first quarter of 2019, in particular, with real GDP growth topping 3 percent in four of those seven quarters, with another quarter nearly hitting the three percent mark. But growth slowed notably in the second and third quarters of 2019, with real growth coming in at 2.0 percent in the second quarter and 2.1 percent in the third.

In fact, if you look over the past year that we have data for, three quarters exhibited poor growth – with growth in fourth quarter 2018 coming in at only 1.1 percent – while the first quarter 2019 registered 3.1 percent.

It was reported in the latest edition of the Federal Reserve’s “Beige Book: “Economic activity generally continued to expand modestly in the final six weeks of 2019.”

The consumer boosted spending at a modest-to-moderate pace, while manufacturing “was essentially flat in most Districts, as in the previous report,” and nonfinancial services business “was mixed but, on balance, growing modestly.”

Trade, once more, stood out as a problem: “In many Districts, tariffs and trade uncertainty continued to weigh on some businesses.”

Labor markets remained tight: “Employment was steady to rising modestly in most Districts, while labor markets remained tight throughout the nation. Most Districts cited widespread labor shortages as a factor constraining job growth, and, in a few cases, business expansion.”

And out of the 12 Federal Reserve districts, growth was reported strong in only Dallas, where it was noted: “Economic activity expanded solidly, with growth increasing in most sectors.” All other districts labeled growth as moderate, modest, edging up, slightly improved, or slight.

Looking ahead, it was reported, “Expectations for the near-term outlook remained modestly favorable across the nation.”

The U.S. has work to do on the policy front to improve the foundation for economic growth, such as significant and permanent pro-entrepreneur, pro-investment tax and regulatory relief; reining in government spending; and shifting course to advance free trade. Given that 2020 is a major election year, it would be nice to hear a strong pro-growth message on the presidential and congressional campaign trails.

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


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