Beige Book Points to Growth, But “Sandy” Weighs on Economic Activity


According to the Federal Reserve’s report on Current Economic Conditions, commonly called the “Beige Book”, economic activity has “expanded at a measured pace in recent weeks”. The Beige Book uses anecdotal evidence of economic activity from contacts located around the twelve districts that make up the Federal Reserve System. According to its compilation, the Federal Reserve cited improvements in consumer spending and residential and commercial real estate. These observations are consisted with recently released data on GDP and housing starts.

However, the increased economic activity was likely restrained by the manufacturing sector and by Hurricane Sandy. “Seven of the twelve Districts reported either slowing or outright contraction in manufacturing.” Meanwhile, some districts experienced noticeable disruptions in economic activity as a result of Hurricane Sandy. For example, retailers in the New York District reported that “business over the past two weeks has been severely hampered by storm disruptions. In the Philadelphia District, “retail sales slowed to a slight pace of growth while auto sales slowed to a modest pace”. In the Richmond District, “some farmers were affected by the storm.”

The Beige Book noted that activity in the residential home market continues to strengthen. According to its report, “overall, markets for single-family homes continued to improve across most Districts, with the exception of Philadelphia and Boston.” The economic slowdown in residential real estate activity for the Philadelphia District reflected the impact of Hurricane Sandy, which made landfall in New Jersey and traveled through the “heart” of the Philadelphia District. “Jersey Shore real estate has been thrown into turmoil by an excess of displaced residents, in addition to utility, construction, and FEMA workers competing for all available rental units as temporary housing.” Reports from the Boston District, noted that “sales growth slowed in September throughout much of the First District among both the condominium and single-family home markets. First District contacts remain fearful that ongoing declines in inventory levels will hurt the selection of homes on the market and discourage buyers in the market. Some contacts say homeowners interested in selling have been reluctant to list their homes in anticipation of greater future price appreciation.”

As noted by the most recent Beige Book, the banking and financial services sector continues to improve on net. Higher demand for home mortgage loans and auto loans increased consumer lending in some Districts, although small business loan demand was generally described as weaker to only moderately higher. For example, “Richmond said that a small commercial banker was encountering a slight improvement in overall loan demand but added that consumer loans were unchanged from ‘meager’ levels and small business loans were virtually non-existent”. However, Chicago noted that “small business loan demand experienced modest growth”.

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  1. Fed Beige Book: Real Estate, Broader Economy Growing « Eye on Housing

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