Fed Beige Book Offers A Dark Take on the U.S. Economy

By SBE Council at 4 September, 2024, 4:17 pm

by Raymond J. Keating -

The latest "Beige Book " from the Federal Reserve pointed to a dramatic slowing of the economy.

Specifically, the report opened: "Economic activity grew slightly in three Districts, while the number of Districts that reported flat or declining activity rose from five in the prior period to nine in the current period."

Let's be clear, 9 out of 12 districts pointed to a flat or contracting economy. That's a worsening from the previous "Beige Book" report.

Of course, this report is just one among many indicators to consider when judging where the economy is and might be headed. The "Beige Book" is based on information from Fed district bank and branch directors, as well as from interviews of business contacts, economists, market observers and others.

A few additional key points are worth highlighting:

• Given the role of the consumer recently in keeping real GDP growing, it was noted, "Consumer spending ticked down in most Districts, having generally held steady during the prior reporting period."

• There was more grim news regarding manufacturing: "Manufacturing activity declined in most Districts, and two Districts noted that these declines were part of ongoing contractions in the sector."

• "Employment levels were generally flat to up slightly in recent weeks. Five Districts saw slight or modest increases in overall headcounts, but a few Districts reported that firms reduced shifts and hours, left advertised positions unfilled, or reduced headcounts through attrition-though accounts of layoffs remained rare."

• And as for inflation, it was reported: "On balance, prices increased modestly in the most recent reporting period."

Despite all of this bad news, looking ahead, it was noted: "District contacts generally expected economic activity to remain stable or to improve somewhat in the coming months, though contacts in three Districts anticipated slight declines."

Let's hope this general optimism wins out over the bad data.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest books on the economy are The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist, The Weekly Economist II:52 More Quick Reads to Help You Think Like an Economistand The Weekly Economist III: Another 52 Quick Reads to Help You Think Like an Economist.

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