The Federal Reserve's Beige Book report for October has indicated a continuation of the sluggish economic conditions observed in September, which could likely lead to further rate cuts in the coming months. The report showed that economic activity was "little changed in nearly all Districts since early September", with most districts reporting a decline in manufacturing activity. Consumer spending reports were mixed, with some districts noting a shift towards less expensive alternatives.
Banking Sector and Housing Market
Despite the overall sluggish conditions, the banking sector activity was reported as "generally steady to up slightly", and loan demand was mixed, with some districts noting an improvement in the outlook due to the decline in interest rates. The housing market activity has generally held up, with inventory continuing to expand in much of the nation. However, uncertainty about the path of mortgage rates kept some buyers on the sidelines, and the lack of affordable housing remained a persistent problem in many communities.
Agricultural and Energy Activity
Agricultural activity was "flat to down modestly", with some crop prices remaining unprofitably low. Energy activity was also unchanged or down modestly, and lower energy prices reportedly compressed producers’ margins. Despite elevated uncertainty, the Fed found that its contacts were somewhat more optimistic about the longer-term outlook, likely as a result of the recent easing cycle.
Labor Markets and Prices
Employment increased slightly during this reporting period, with more than half of the Districts reporting slight or modest growth and the remaining Districts reporting little or no change. Wages generally continued to rise at a modest to moderate pace. Inflation continued to moderate with selling prices reportedly increasing at a slight or modest pace in most Districts.
Highlights by Fed District
The Beige Book also provided details by Fed District, with economic activity being flat in Boston, little changed in New York, and declining slightly in Philadelphia. Cleveland reported stable business activity, while Richmond reported modest growth. Atlanta reported a slight decline, Chicago reported a slight increase, and St. Louis reported no change. Minneapolis reported a slight decline, Kansas City reported steady activity, Dallas reported modest growth, and San Francisco reported steady activity.
Bottom Line
If the September Beige Book was what led the Fed to cut 50bps, then the October Beige Book, with the added concern of a full-blown manufacturing recession, assures more rate cuts in the coming months. What are your thoughts on this? Do you agree with the Fed's assessment of the economic conditions? Share this article with your friends and let us know your thoughts. Don't forget to sign up for the Daily Briefing, which is every day at 6 pm.
The Federal Reserve's Beige Book report for October has indicated a continuation of the sluggish economic conditions observed in September, which could likely lead to further rate cuts in the coming months. The report showed that economic activity was "little changed in nearly all Districts since early September", with most districts reporting a decline in manufacturing activity. Consumer spending reports were mixed, with some districts noting a shift towards less expensive alternatives.
