The Federal Reserve’s Beige Book, a compilation of mostly anecdotal information from the 12 Federal Reserve districts was generally more upbeat than most recent Beige books have been:
“Manufacturing activity continued to expand in almost all Districts, with relatively strong growth seen in metal fabrication and the automotive industries. Reports also showed steady to increasing activity for professional and nonfinancial services. Two Districts noted a decline in demand from government agencies due to budgetary shortfalls.
“Reports on consumer spending tended to be positive. Nonetheless, several Districts noted that households remain price sensitive and focused on buying necessities.
“Expectations for the holiday shopping season were generally positive, with several Districts expecting higher sales when compared to year-ago levels. Sales of new cars and light trucks were largely higher than in our last report. Tourism improved in all reporting Districts.”
However, there continue to be major weak spots in the economy, most notably in the housing and Real Estate area.
“Housing markets remain depressed, with several Districts reporting further weakening during the past six weeks. Conditions in commercial real estate were mixed, and activity stayed at low levels.”
Things are going great down on the farm.
“Agricultural conditions were generally favorable, with several Districts reporting yields nearing historic highs. Agricultural sales to off-shore buyers increased…Mainly favorable weather conditions helped facilitate early harvesting and the planting of winter crops. The Chicago, Minneapolis, and Dallas Districts reported large to record-setting yields for certain crops. Agricultural prices continued to climb, boosting farm incomes.”
Meanwhile, prices remain under control.
“Prices of final goods and services were fairly stable across Districts despite rising input costs, especially for agricultural commodities, metals and fuel.”
We are also starting to get some traction on the employment front.
“Hiring activity showed some improvement across most Districts, although employers are waiting for clearer signals of expanding business prospects before adding significantly to payrolls. A preference for part-time and temporary workers was reported in the Atlanta and Chicago Districts.
“Seasonal hiring in retail trade is expected to be higher this year in Chicago and San Francisco than in the previous two years. Employers in the Boston, Richmond, and Minneapolis Districts reported having difficulty finding skilled workers.
“Employment agencies in the New York, Richmond, and Chicago Districts reported a moderate increase in new job openings, while staffing firms in Dallas said that hiring activity is strong. Boston staffing contacts noted that labor demand has strengthened, particularly in the information technology, medical, manufacturing, and legal sectors. Wage pressures remain subdued across Districts.”
While it is clear that we are not yet out of the woods — and I worry that the combined forces of further declines in housing prices and fiscal austerity could derail the recovery — this is a very encouraging report.