Highlights
The Federal Reserve's Beige book prepared for the September 16 FOMC meeting indicated further slowing in the economy with most Fed districts reporting business conditions as "weak," "soft," or "subdued." Importantly, all districts reported tighter lending standards. Recent financial instability has turned into a broad credit crunch. In the real economy, consumer spending has slowed to the essentials while housing is still slipping as loan demand for mortgages has fallen. Manufacturing was "weak or declining" in most Districts although a few regions showed modest improvement. Exports were providing support to manufacturing but even export growth is slowing. Commercial real estate activity declined or remained weak in all but one District. Essentially, the Fed report indicates that the economy is headed to another round of flattish growth.

On the inflation front, all Districts reported price pressures from elevated costs of energy, food, and other commodities, although some have seen declines or slower increases in prices for several industrial commodities and energy products. More businesses are raising selling prices due to higher costs. But wage pressures are still seen as "moderate" due to the pullback in hiring. Labor market conditions were reported as "unchanged or somewhat softer."

Today's Beige Book clearly is blue - the outlook for near-term economic growth is not good. The implications include that it is going to take some time for credit market problems to fully resolve. The key consumer and housing sectors are likely to be sluggish in coming quarters. But the Fed will be getting its wish for slower growth that may help bring inflation down. But it will be a balancing act to see if the improvement in inflation is soon enough without raising rates late this year or early 2009.

Markets had little initial reaction to today's report.

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