Wednesday, April 25, 2007

The Beige Book

The Fed released the Beige Book today.

Most parts of the country logged moderate economic growth in the early spring, despite sluggish manufacturing largely due to the housing slump.

The fresh snapshot of the national economy, released Wednesday by the Federal Reserve, found that "manufacturing activity was slow" in many areas and that "residential real estate activity continued to weaken, with sales declining in many districts and flat in a number of others."

Here's a link to the full report.

Here are some relevant bullet points from the report (in italics):

-- Reports on retail sales across the Districts were generally positive, although vehicle sales were mixed in several Districts.

-- Reports on retail sales in most Districts were generally positive.

-- Reports on vehicle sales were mixed among the Districts.

-- Residential real estate activity continued to weaken in many Districts.

These points lead to a question. Just how confident is the consumer? Assuming that buying durable goods indicates confidence, the consumer might not be as confident as it appears. Autos sales are mixes and housing numbers aren't that strong.

-- Manufacturing activity remained slow overall, although reports on conditions in the manufacturing sector varied across Districts.

-- Activity in the services sector increased in most areas throughout the Districts, particularly for firms serving business customer

Business seems to be doing alright, but not great.

-- Most Districts reported continuing tight labor market conditions, especially for skilled occupations, although several Districts reported expansions in employment levels.

-- Wage increases were reported in some industries of the New York, Philadelphia, Richmond, Atlanta, Chicago, Minneapolis, Kansas City, Dallas, and San Francisco Districts. These were generally modest

These figures are the key to keeping the economy in positive territory right now. So long as job growth is at least moderate and wage growth over the inflation rate continues, consumers will probably continue to spend.

-- Consumer prices remained generally stable or increased modestly, but most Districts reported a rise in input prices, particularly for metals and raw materials

This could really put the Fed in a bind of the economy continues to slow.