Fed Beige Book: No Surprises


The current Federal Reserve Beige Book took a slightly more pessimistic tone than the previous survey.

The report, a summary of economic activity and conditions, collected through interviewers with key market contacts in the Fed’s districts for the month of May, noted that while economic growth continued “a few Districts indicated some deceleration.” In particular, the Fed noted some slowing in the New York, Philadelphia, Chicago and Atlanta federal reserve districts.

The Fed survey indicated that manufacturing activity continued to grow, albeit at a slower pace in some parts of the country. The report also noted solid expansion for business and professional services, as well as information technology. Given the temporary tax expensing provisions in place for 2011 for some kinds of business investment, it is not surprising to see relative strength in these sectors.

With respect to recent consumer spending weakness, the Fed doesn’t offer much in the way of new analysis. The Beige Book cited weather issues, elevated food and energy costs, and supply chain disruptions (particularly in the auto sector) as possible reasons for weakness in household spending.

For construction, the Beige Book reported:

Residential construction and real estate continued to show widespread weakness, except in the rental segment, where market conditions have strengthened and construction activity and development have picked up. Non-residential real estate leasing markets have been generally stable, while construction activity has remained very subdued. Loan demand was steady to stronger in most Districts, especially in the commercial and industrial sector, and widespread improvement was reported in credit quality.


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