Beige Book Reveals Broad Economic Weakness

The Fed’s latest Beige Book portrays an already weak economy growing weaker. 

The book is published eight times each year and summarizes economic conditions in each of the twelve Federal Reserve Districts.  The latest Beige Book is very similar to October’s report which noted weakened economic activity across all Districts.  Here is a summary of the results from several components:

Consumer Spending and Tourism: Weakened in nearly all Districts.

Services: Weakened in most Districts. Two districts reported strengthened demand for bankruptcy services.

Manufacturing: Weakened in all 12 Districts.

Real Estate and Construction: Lower sales in most Districts. Nine out of twelve Districts reported decreases in home prices. Commercial real estate showed broad weakening and decreased leasing activity in almost all Districts. 

Banking and Finance: Slowed in most Districts. Increases in loan delinquencies and defaults in several Districts. Credit conditions remained tight.

Agriculture and Natural Resources: Mixed results across Districts.

Labor: Slowing in most Districts, wage pressures remained limited in all Districts (with the exception of skilled labor in a few markets).

Prices: Inflation pressures eased in most Districts.

Data from www.federalreserve.gov

The Beige Book revealed bright spots in a few Districts.  Three Districts reported strong demand for skilled workers.  Four Districts reported higher demand for low to mid-priced starter homes. Unfortunately the one service sector which saw growth in a few Districts was bankruptcy services.

I wonder how many more bad Beige Books we will have to endure.  At least now that officials have finally admitted the U.S. economy is in a recession the markets are free to shrug off dismal data.  All three major indexes posted gains today.  The Dow gained 2 percent, while the Nasdaq and S&P 500 tacked on 2.94 and 2.58 percent, respectively. Why?  The element of surprise is gone!