Fed’s Beige Book Points to Messy Economy

By at 20 October, 2022, 10:30 am

by Raymond J. Keating – 

The latest edition of the Federal Reserve’s “Beige Book” pointed to a messy economy. That’s anything but surprising.

This survey of various contacts outside the Fed pointed to an economy growing “modestly,” but that assessment varied considerably across the economy. Indeed, the term might be a bit optimistic based on the rest of the report.

It was noted that out of the 12 Fed Districts, four “noted flat activity and two cited declines, with slowing or weak demand attributed to higher interest rates, inflation, and supply disruptions.” As for the other six districts, three pointed to slight growth and three saw modest growth. So, none of the districts saw indications of solid growth, and nine of the 12 experienced growth that was less than modest.

Retail spending was reported as being “relatively flat.” Manufacturing “held steady or expanded in most Districts in part due to easing in supply chain disruptions, though there were a few reports of output declines.”

Real estate – both single family and commercial – was not faring well due in part to higher interest rates.

The lone clear positive came in travel and tourist activity, which were “boosted by continued strength in leisure activity and a pickup in business travel.” But it also should be noted that travel and tourism are still recovering from astounding depths.

As for inflation, it was reported, “Price growth remained elevated, though some easing was noted across several Districts. Significant input price increases were reported in a variety of industries, though some declines in commodity, fuel, and freight costs were noted.”

And on the labor market front, employment grew at a “modest to moderate pace.” However, it also was noted, “Several Districts reported a cooling in labor demand, with some noting that businesses were hesitant to add to payrolls amid increased concerns of an economic downturn.” And in fact, employment tends to be economic laggard.

As for the general economic outlook, it was summed up this way: “Outlooks grew more pessimistic amidst growing concerns about weakening demand.”

While one might expect that growth would be robust coming out of a pandemic economy, that clearly is not the case as we’re stuck in a tough stagflation period. Unfortunately, as SBE Council has said time and again, policymakers are working to make matters worse, with the Biden White House and Congress focused on anti-growth increases in taxes, regulations and government spending, and the Federal Reserve trying to inflict additional economic damage in its battle with inflation. How about a pro-growth policy agenda, including tax and regulatory relief, and free trade (see some SBE Council pro-growth details), instead?

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest book is The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist.


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