Fed Beige Book – Consumer Spending Up While Real Estate Sector Remains Depressed

Written by: Scott Sery

The first Fed Beige Book release of the year indicates that the economy is looking good, but not great.  The reports from the most recent Beige Book show that the overall economy is recovering at a modest to moderate pace.  Many of the districts are showing a good sign of recovery, while only one indicates that things are flattened or slightly improved.

Consumer spending has picked up.  Compared to last year, the holiday season brought about an increase in consumer spending.  Much of the spending was directed toward luxury goods, such as jewelry and electronics, and automobiles.  Large ticket items like these will help to drive the economy and keep the money moving since many are financed.

Financial sectors show that the mortgage loans for both residential and commercial remain depressed.  They continue to move in an overall upward direction, but they are sluggish.  As seen in the recent release by the MBA, the real estate sector is taking quite a while to turn around and return to the robust levels previously seen.

Manufacturing continues to increase in most areas with the exception of technology.  A boost in the demand for heavy equipment (due to an increase in the agricultural and energy sectors) spurred a growth in this subsector of manufacturing.  Overall, manufacturing is seeing an excellent turnaround, in some cases reversing a slowdown in prior periods.

The Beige Book reports are designed to give Federal Reserve, and investors, a look at what the economy has done in the past 6 weeks.  From this point the Fed will decide how they want to act with the money supply.  If the Beige Book shows an overheating economy or a rise in inflation, then the Fed may choose to raise interest rates.  The latest release from the Beige Book is showing that there is slow, yet steady growth in the economy.

The Beige Book is a summary of how the economy is doing in the major districts around the country.  It is released eight times per year, each time two weeks ahead of the next Federal Reserve meeting.  The snapshots include sectors such as real estate, consumer spending, manufacturing, and several others.  It is considered by many to be the most important economic indicator and can have a profound effect on the market.

As the most important economic indicator, the Beige Book carries a lot of weight with investors.  Using the information provided, they can accurately determine what the next course of action will be from the Fed.  However, if their prediction is wrong, speculation in the market can go wild and have far reaching effects.  A good report from the Beige Book will help give a psychological boost to many, which in turn will help to further increase growth in the economy.


Fed Beige Book – Consumer Spending Up While...

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