Highlights
The Federal Reserve's Beige book prepared for the October 29 FOMC meeting reported that the economy continued to weaken in recent weeks while inflation pressures have moderated. The Fed's regional contacts have become "more pessimistic." Perhaps most disconcerting is the Beige Book's statement that "consumer spending decreased in most Districts" with declines seen in retailing, autos, and tourism. The consumer sector is the bulwark of the economy. Most sectors were reported as weak, including manufacturing, residential real estate, and commercial real estate activity. Positives were mainly limited to agriculture and natural resources. Contributing to weakening in the economy were "tight" credit conditions across all twelve Fed districts.

Manufacturing declined in most districts and respondents are increasingly concerned about the outlook. Not surprisingly, manufacturing softness was most notable for housing-related, building materials, and construction equipment. The auto industry continued to decline. There were even reports of declines in export orders by some manufacturers.

The status of credit markets is a key concern currently. Unfortunately, the Beige Book described bank lending as "either stable or lower for both consumers and businesses." Banks have been more cautious about lending and there were a number of reports from businesses of "difficulties in obtaining credit."

The key positive in the report was that inflation pressures "moderated" a bit in September. Some pass-through was reported for some metals, food, and energy, but most districts reported that cost pressures had eased. District reports on costs were mixed but mainly on the softer side. "Dallas noted that businesses facing softer demand plan to pass cost reductions on to customers, and Cleveland cited a decline in fuel surcharges as gasoline prices fell. However, respondents in Chicago and Dallas also reported that they continued efforts to pass-through earlier cost increases. Philadelphia, Dallas, and San Francisco noted increased discounting by retailers; Richmond reported that retail prices were rising less quickly; and Kansas City reported only a slight rise in retail prices."

The bottom line is that the latest Beige Book shows the economy likely in contraction with inflation easing but credit tightness the key problem. The Fed and Treasury will continue their innovative approaches toward loosening the credit markets. But the credit correction is going to take time.

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