Fed’s Beige Book Reveals Discouraging Clues on the Economy

By at 2 June, 2022, 9:20 am

 by Raymond J. Keating –

The latest edition of the Federal Reserve’s Beige Book was released on June 1, offering clues on the economy from interviews with various Fed contacts.

Based on information gathered on or before May 23, it was noted that “a majority” of Fed districts indicated “slight or modest growth,” with four Districts pointing to “moderate growth” and four Districts “explicitly” noting “that the pace of growth had slowed since the prior period.”

That’s not surprising, but nor was it encouraging, that is, unless one was expecting the economy to continue to contract in the second quarter (which still cannot be fully ruled out, by any means).

Long list of economic head winds

The list of troubles was rather lengthy, including softening consumers who are facing higher prices; weakening in residential real estate due to higher prices and rising interest rates; continuing labor market problems and supply chain disruptions; Russia’s invasion of Ukraine; and COVD-19 disruptions.

Employment was growing “modestly or moderately in a labor market that all Districts described as tight.” More specifically, “worker shortages continued to force many firms to operate below capacity,” and “firms continued to deploy automation, offer greater job flexibility, and raise wages.”

As for inflation, it was no surprise to read:

“Most Districts noted that their contacts had reported strong or robust price increases – especially for input prices.”

Looking ahead, it was reported, “Eight Districts reported that expectations of future growth among their contacts had diminished; contacts in three Districts specifically expressed concerns about a recession.”

Again, these “clues” are discouraging to say the least, which is why policy needs to support businesses and investment, rather than creating more uncertainty and imposing tax and regulatory costs that only fuel existing head winds.

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


News and Media Releases