Beige Book Summary: "Optimism" - 24; "Pessimism" - 1

While in the "market", in which both bad and good news once again send stocks to new ATH, newsflow no longer matters, the most irrelvant of all economic reports is the Fed's beige book. It was thus not surprising to see stocks have absolutely zero reaction to a report which according to the Fed saw the US economy grow in every region of the US, bolstered by consumer spending, tourism, manufacturing and improving labor market. In fact: everything apparently is great. So great that one wonder why the Fed is still monetizing tens of billions every month and ZIRP is on the Fed's calendar for at a year more.

Some of the highlights:

  • The pace of economic growth was characterized as moderate in New York, Chicago, Minneapolis, Dallas, and San Francisco, while the remaining Districts reported modest expansion.

The difference between modest and moderate is still unclear.

  • Overall consumer spending increased in every District. Retail sales grew modestly in most Districts, with increases that were generally similar to the previous reporting period. Vehicle sales remained stronger than non-auto retail sales, with Philadelphia, Richmond, Atlanta, and San Francisco indicating robust to very strong auto sales.
  • Hotel contacts described robust activity in the Boston, New York, Atlanta, and Minneapolis Districts, while Philadelphia and Richmond noted activity levels that were in line with seasonal norms.
  • Many Districts reported positive growth for professional and business services, including healthcare consulting, advertising, engineering, accounting, and technology.
  • Manufacturing activity expanded in all twelve Districts.
  • Reports on real estate activity varied across the Districts. Many Districts reported low inventories and increasing home prices, but demand was mixed. Boston, New York, and St. Louis reported home sales were below year-ago levels, while Chicago noted a decrease in home sales since the last survey period. Home sales in other Districts remained steady or increased.
  • Loan volumes rose across the nation, with slight to moderate increases reported in most Districts.
  • Most fall crops were reported in good or better condition, and expectations of higher production lowered crop prices. Profitability improved for livestock operators in the Atlanta, Minneapolis, and Kansas City Districts due to high cattle and hog prices. Oil production expanded in the Minneapolis, Kansas City, and Dallas Districts, while natural gas and coal production remained relatively steady in reporting Districts.
  • Labor market conditions improved, as all twelve Districts reported slight to moderate employment growth. Several Districts continued to report some difficulty finding workers for skilled positions.
  • Price pressures were generally contained, with most Districts reporting slight to modest price increases for both inputs and finished goods

And so on.

Perhaps the most informative data point however was that in counting instances of the following words:

  • "Optimistic" or "optimism": 24
  • "Pessimism": 1

It appears Americans around the country, in a ratio of 24-to-1, took seriously Obama's advice to be less cynical and more full of hope.


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