Beige Book shows economy flatening, employment moderated further

The Beige Book showed economic activity was “little changed in nearly all Districts” compared to August’s report which had three Districts showing growth and nine showing flat/declining activity.

• Employment growth moderated further, with hiring now “focused primarily on replacement rather than growth” compared to August’s steady levels
• Manufacturing weakness became more widespread, with “most Districts” now reporting declines
• Consumer spending shifted from “ticking down” to “mixed,” with consumers increasingly seeking less expensive alternatives
• Housing activity showed resilience despite affordability challenges, with inventory expanding and prices generally holding steady or rising slightly
• Banking sector stabilized somewhat, with “generally steady to up slightly” activity versus previous weakness

Inflation Trends:

• Price increases continued moderating, with most Districts reporting slight to modest increases
• Wage growth remained modest to moderate but showed further signs of cooling
• Multiple Districts noted profit margin compression as input costs rose faster than selling prices

If anecdotal reports are at the front end of economic forecasting –as many at the Fed believe — then the comments in the Beige Book should soon start trickling into economic data. The market is on a sugar high from the Fed cuts and the sense of a Fed put but the soft landing scenario isn’t assured.

This article was written by Adam Button at www.forexlive.com.