The Federal Reserve’s Beige Book, The central bank’s usual monthly bulletin, which paints a picture of the state of the economy in the Fed’s twelve districts, speaks of a recessionary picture of the US economywhere employment is stagnating and activity is showing clear signs of slowing down. A important signal in view of the publication of the labor market reporttomorrow, and of the Board meeting of the central bank, in mid-September.
Activity in the 12 Districts
Economic activity in the twelve Fed Districts did not provide encouraging signals in August: in nine Districts (New York, Philadelphia, Cleveland, Richmond, Atlanta, St Louis, Minneapolis, Kansas City and San Francisco) the activity was stagnant or slowing and only in three districts (Boston, Chicago and Dallas) the activity resulted in moderate growth.
Consumer spending has decreased in most districts, after having remained generally stable during the previous reference period. Manufacturing activity declined in most districts and two districts noted that these declines were part of ongoing contractions in the sector. Residential and real estate construction activities they were contrastingeven though reports from most districts indicated a decline in home sales.
Occupation holds
THE employment levels – explains the Fed report – there are still overall stablealthough there have been isolated cases where companies have filled only the necessary positions, reduced hours and shifts, or lowered overall employment levels. However, the reports of layoffs they remained rare. An important indication in view of the publication, tomorrow, of the Job Report U.S. labor market report, which is closely watched by the central bank for monetary policy decisions.
Wage and price growth remains under control
Overall, the wage growth has been modest, while increases in non-labor input costs and selling prices were small to moderate. Also the price growth it was modest in the most recent period. However, three districts reported only small increases in selling prices. Non-labor input cost increases were widely described as modest to moderate and generally decreasing, although one district described input cost increases as increasing. Looking to the futureit is generally expected that the price and cost pressures will stabilize or ease further in the coming months.
A signal to the Fed
What emerged from the Beige Book is therefore reinforcing expectations of a more robust rate cut by the Federal Reserve, which will meet in mid-September to decide on a possible interest rate cut. Expectations are largely for a 50 basis point cut for September and maybe another intervention between 25 and 50 points in December.
