Highlights
The Federal Reserve's Beige book prepared for the April 29-30 FOMC meeting was decidedly negative, noting that "that economic conditions have weakened since the last report. Nine districts noted slowing in the pace of economic activity, while the remaining three -- Boston, Cleveland, and Richmond -- described activity as mixed or steady." Odds likely picked up for a rate cut on April 30.

Adding to the economy's earlier woes is a softening in consumer spending with retail and auto sales weak. Housing was described as 'anemic' while the commercial construction sector has slowed. The service sector is mixed with transportation weak, business and health services expanding and others mixed.

Somewhat on the positive side, manufacturing was described as 'mixed' -- in contrast to recently negative reports from some manufacturing surveys. But the outlook for manufacturing is 'subdued.' One clear positive is tourism, led by an influx of foreign visitors.

Regarding the all important issue of improvement or not in the credit markets, there appears to be a worsening' at least at the consumer level. 'Credit quality was reported to have deteriorated, on balance, since the last report. Increased delinquency rates were noted by New York, Philadelphia, and Cleveland, while Kansas City reported that loan quality remained lower than a year ago. Widespread tightening in credit standards was reported, especially on residential and commercial real estate loans.'

Inflation is still a problem despite some softening in the labor markets. 'Labor markets were mostly described as weakening since the last report, though a few Districts reported ongoing shortages of skilled workers and some Districts noted wage pressures. Increases in input costs were widespread, accompanied by somewhat smaller rises in selling prices.'

The bottom line is that the Fed is increasingly facing the problem of stagflation. The economy is still contracting, but not dramatically. Outside of the glut in housing, the biggest problem is still a deteriorating credit market and that may tip the balance for one more cut in rates by the Fed on April 30. But the Fed will be looking over its shoulder at looming inflation and wonder how soon the Fed can turn rates back up. Equities slipped from their earlier highs on the release of the Beige Book.

2008 Release Schedule

Released On: 1/16 3/5 4/16 6/11 7/23 9/3 10/15 12/3 Released For: Dec Feb Mar May Jun Aug Sep Nov