The U.S. economy grew at a "modest to moderate" pace over the September to early October period, according to the latest Federal Reserve Beige Book. This is the same characterization of economic growth that has been in place since the end of April.
Consumer spending grew modestly in most Districts. Momentum remained strong for auto sales. Elsewhere, retail sales were characterized as "steady", with retailers remaining optimistic about the upcoming holiday season.
Residential construction increased at a moderate pace across Districts, particularly in the multifamily sector. Nonresidential construction on the other hand increased at a modest pace, but the outlook for commercial real estate was generally positive, amidst falling vacancy rates and rising rents.
Overall, business spending grew only modestly in most Districts, but several noted an improvement in capital spending plans.
Manufacturing activity generally grew at a modest pace, with the automotive and aerospace sectors representing a continued source of strength.
In terms of the labor market, employment growth remained modest, with several Districts reporting that employers were cautious given current fiscal uncertainty.
Key Implications
In the absence of most government data releases, the Beige Book takes on added importance in gauging the state of the recovery. The period covered by the survey includes the weeks leading up to, as well as the first week of the government shutdown. The fact that the characterization of the economy remains unchanged is a positive signal, underscoring resilience in the face of government furloughs and declining consumer confidence.
Overall, although the characterization of the economy remained unchanged, the tone of the report appeared somewhat more subdued relative to previous editions. A notable theme across different sections of the report was the issue of uncertainty, mostly from the government shutdown and debt ceiling debate, but also from the rise in mortgage rates. However, even with this degree of uncertainty, a number of forward-looking indicators remained upbeat suggesting that beyond the fiscal uncertainty, the underlying guts of the recovery remain intact.
With the news that the Senate has struck a deal to end the shutdown and raise the debt ceiling, political uncertainty should subside at least in the immediate term. To some extent, the damage is already done. Relative to our September basecase forecast of 2.6% real GDP growth in Q4, the shutdown will likely drag growth closer to 2% than 3%.
Consumer spending grew modestly in most Districts. Momentum remained strong for auto sales. Elsewhere, retail sales were characterized as "steady", with retailers remaining optimistic about the upcoming holiday season.
Residential construction increased at a moderate pace across Districts, particularly in the multifamily sector. Nonresidential construction on the other hand increased at a modest pace, but the outlook for commercial real estate was generally positive, amidst falling vacancy rates and rising rents.
Overall, business spending grew only modestly in most Districts, but several noted an improvement in capital spending plans.
Manufacturing activity generally grew at a modest pace, with the automotive and aerospace sectors representing a continued source of strength.
In terms of the labor market, employment growth remained modest, with several Districts reporting that employers were cautious given current fiscal uncertainty.
Key Implications
In the absence of most government data releases, the Beige Book takes on added importance in gauging the state of the recovery. The period covered by the survey includes the weeks leading up to, as well as the first week of the government shutdown. The fact that the characterization of the economy remains unchanged is a positive signal, underscoring resilience in the face of government furloughs and declining consumer confidence.
Overall, although the characterization of the economy remained unchanged, the tone of the report appeared somewhat more subdued relative to previous editions. A notable theme across different sections of the report was the issue of uncertainty, mostly from the government shutdown and debt ceiling debate, but also from the rise in mortgage rates. However, even with this degree of uncertainty, a number of forward-looking indicators remained upbeat suggesting that beyond the fiscal uncertainty, the underlying guts of the recovery remain intact.
With the news that the Senate has struck a deal to end the shutdown and raise the debt ceiling, political uncertainty should subside at least in the immediate term. To some extent, the damage is already done. Relative to our September basecase forecast of 2.6% real GDP growth in Q4, the shutdown will likely drag growth closer to 2% than 3%.
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