Modest Growth is Apparently Not Very Popular

The latest edition of the Beige Book reports modest or moderate growth in all 12 districts. This is really pretty good news. It would seem to contradict the gloomy outlook, but it doesn’t.

Consumers are weary of all this slow growth and seem to want a real breakout. This is understandable, but modest growth certainly beats sinking back into some kind of recession.

Several interesting points were made in the latest edition of the Beige Book, a somewhat unique offering from the Federal Reserve that is as much anecdotal as it is well-formed assessment. It reflects staff opinions as well as those who are a part of the various Fed advisory boards for the districts and serves as more of a temperature check than anything definitive on the current state of the economy.

Most companies in the 12 regions expect consistent or improving growth in the coming months. That bodes well for additional hiring as well as capital investment. Most of the oil-related industries remain in the doldrums, but there is some expectation that conditions will shift in the not very distant future.

The value of the dollar has slipped a little. That has been mildly encouraging to the export community. The bigger issue regarding exports, however, has been the financial condition of the countries where the U.S. sells. It really would not matter if the dollar was far weaker than it is right now given the slow growth in Europe, China, Brazil and several other markets the U.S. depends on.

One issue that emerged in the course of the Beige Book analysis was the Brexit. The FOMC has been worried about the impact of the U.K. leaving the EU and has been trying to determine what it would mean for the U.S.

The Beige Book look at agriculture anticipates harvests will be solid this year, but that also means that commodity prices will be low. The manufacturing community shows some sectors as thriving and others, stressed. Manufacture of cars and trucks continues to be the production star, but aerospace and appliances also showed gains, as well as business machines and industrial products. Good news is also coming from the banking sector as demand for loans has been up, and those that are doing the demanding are in better financial shape than in the past. The financial sector in general looks to be in good shape, which is why the Fed has been downplaying a 2008-09 downturn repeat.

- Chris Kuehl, Ph.D., NACM economist and co-founder of Armada Corporate Intelligence

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