In the Beige Book prepared by the Chicago Fed, covering the period from August 26 to October 7 which includes the first week of the government shutdown, companies surveyed expressed concerns over the impact of a prolonged shutdown of the US government. 8 Districts reported similar growth rates in economic activity previously while growth slowed in the Philadelphia, Richmond, Chicago, and Kansas City Districts. The overall tone of the report was more dovish than previous ones although it continued to describe that that economic activity expanded at a 'modest to moderate' pace.
As stated in the report, companies surveyed generally indicated that they 'remained cautiously optimistic in their outlook for future economic activity, although many also noted an increase in uncertainty due largely to the federal government shutdown and debt ceiling debate'. On employment, the growth remained 'modest' and companies in several districts were 'cautious to expand payrolls, citing uncertainty surrounding the implementation of the Affordable Care Act and fiscal policy more generally'. For instance, retail hiring Cleveland and Dallas was 'primarily limited to staffing of new stores' while hiring in Boston's manufacturing sector was mainly for 'replacement or to fill key needs'. Meanwhile, 'New York noted slower job growth, and Chicago reported that manufacturers were cutting back on overtime'. Yet, demand for skilled labor remained high in many Districts.
Manufacturing activities expanded 'modestly' with Cleveland, St. Louis, and Minneapolis experiencing faster growth while New York, Richmond, and Chicago showing weakness. The expansion was driven by strength in the automotive and aerospace industries. Concerning the impact of the government shutdown, there was 'little immediate disruption' but many companies were 'worried about the potential impact if the closing became prolonged'.
The construction and real estate sectors 'continued to improve' as home sales and prices rose in most districts with Minneapolis and Dallas Districts showing stronger pace of expansion while Richmond and Philadelphia growing 'slightly'. A number of Districts reported 'concerns from homebuilders and realtors over rising mortgage rates'. Yet, Dallas indicated that 'rising interest rates were not hurting affordability' while Boston experienced 'some boost to activity by homebuyers entering the market in anticipation of future increases in rates'. It appears, in general, that the increase in mortgage rates and recent rise in home prices should not derail the housing recovery which has been recently driven by the rise in fundamental demand.
Overall, the tone of the report is more dovish than previous ones, reflecting companies' concerns over the government shutdown, as well as the fiscal uncertainty. These worries should, however, dissipate once the lawmakers reach a deal.
As stated in the report, companies surveyed generally indicated that they 'remained cautiously optimistic in their outlook for future economic activity, although many also noted an increase in uncertainty due largely to the federal government shutdown and debt ceiling debate'. On employment, the growth remained 'modest' and companies in several districts were 'cautious to expand payrolls, citing uncertainty surrounding the implementation of the Affordable Care Act and fiscal policy more generally'. For instance, retail hiring Cleveland and Dallas was 'primarily limited to staffing of new stores' while hiring in Boston's manufacturing sector was mainly for 'replacement or to fill key needs'. Meanwhile, 'New York noted slower job growth, and Chicago reported that manufacturers were cutting back on overtime'. Yet, demand for skilled labor remained high in many Districts.
Manufacturing activities expanded 'modestly' with Cleveland, St. Louis, and Minneapolis experiencing faster growth while New York, Richmond, and Chicago showing weakness. The expansion was driven by strength in the automotive and aerospace industries. Concerning the impact of the government shutdown, there was 'little immediate disruption' but many companies were 'worried about the potential impact if the closing became prolonged'.
The construction and real estate sectors 'continued to improve' as home sales and prices rose in most districts with Minneapolis and Dallas Districts showing stronger pace of expansion while Richmond and Philadelphia growing 'slightly'. A number of Districts reported 'concerns from homebuilders and realtors over rising mortgage rates'. Yet, Dallas indicated that 'rising interest rates were not hurting affordability' while Boston experienced 'some boost to activity by homebuyers entering the market in anticipation of future increases in rates'. It appears, in general, that the increase in mortgage rates and recent rise in home prices should not derail the housing recovery which has been recently driven by the rise in fundamental demand.
Overall, the tone of the report is more dovish than previous ones, reflecting companies' concerns over the government shutdown, as well as the fiscal uncertainty. These worries should, however, dissipate once the lawmakers reach a deal.
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