The Federal Reserve released the Beige Book today. As exciting as its color, it describes the local economic conditions in each of the 12 districts of the Federal Reserve. This document is released 8 times per year and summarizes information received from business. Thus it is not a commentary on behalf of the Fed.
The report showed that while economic activity remains at low levels, conditions have improved modestly, and that these conditions are broadening out among the different districts. 10 of the 12 districts reported increased activity or improving conditions, while the other 2, Philadelphia and Richmond, reported mixed conditions. The last report showed improvement in just 8 of the 12 districts.
The Beige Book generally is not market moving, but it does summarize economic conditions well. It is also used by the FOMC when determining monetary policy, which makes it important. Based on this information, expect the next FOMC statement on January 27 to be similar and rates to remain unchanged. The US dollar continued to lose strength today and unless risk aversion or deleveraging hits the markets, expect it to continue.
Source: The Beige Book
Beige Book summary Highlights:
Consumer spending during the 2009 holiday season, Q4, improved upon 2008, but was still significantly less than 2007.
Manufacturing activity has increased or held steady since the last report in most Districts. Among Districts reporting on near-term expectations, the manufacturing outlook was optimistic, but spending plans remain cautious.
Toward the end of 2009, home sales increased in most Districts, especially for lower-priced homes. Home prices appeared to have changed little since the last Beige Book, and residential construction remained at low levels in most Districts. Commercial real estate was still weak in nearly all Districts with rising vacancy rates and falling rents
Although some hiring was reported in a few Federal Reserve Districts, labor market conditions remained generally weak with modest wage increases appearing in just a few Districts. Price pressures remained subdued in nearly all Districts, though increases in metals prices were reported and agricultural prices have been mixed.
