Posts Tagged ‘Beige Book’

Let’s Go Shopping!

Tuesday, April 24th, 2012

Despite rising gas prices, retail sales in the U.S. rose 0.8 percent in March, proof that consumers are still filling up their tanks, according to economists.  The rise in purchases follows a 1.1 percent increased in February that was the biggest in five months, according to a survey of 71 economists.  The gain sent retail sales to a record high of $411.1 billion, 24 percent higher than the recession low hit in March 2009.  “Retail sales are going to end the quarter on a positive note,” said Ryan Sweet, a senior economist at Moody’s Analytics Inc.  “Underlying job growth is decent.”

Sales may have been helped by the unusually warm weather. The average temperature was 51.1 degrees Fahrenheit, the warmest on record for the month in the past 117 years, according to the National Oceanic and Atmospheric Administration.  The economy expanded “at a modest to moderate pace” from mid-February through late March as manufacturing, hiring and retail sales strengthened, according to the Federal Reserve’s latest Beige Book report.  The central bank is maintaining its benchmark interest rate near zero until late 2014 to encourage economic expansion.

Americans spent more on building materials, cars, electronics, furniture and clothing in March.  A separate Department of Commerce report showed that American companies restocked at a steady pace in February, which suggests that businesses expect consumers to continue spending this spring.  The retail sales report is the government’s initial monthly look at consumer spending, which represents 70 percent of economic activity.  The increase, along with other positive data on inventories and trade, suggests growth in the January-March quarter could be stronger than first thought.  Economists are estimating growth at an annual rate of between 2.5 percent and three percent in the 1st quarter, which is in line with the annual pace reported for the October-December quarter.  Americans are feeling greater confidence in the economy after seeing hiring strengthen over the winter.  Job gains were typically 246,000 per month from December through February.

In terms of cars, “The industry and consumers have been very resilient in the face of higher pump prices,” Don Johnson, vice president of U.S. sales at General Motors, said.  “The steadily improving economy is playing a role and so is pent-up demand and an improved credit market.”

Corporate stockpiles rose a seasonally adjusted 0.6 percent, according to the Commerce Department. That’s less than January’s upwardly revised gain of 0.8 percent. The increase pushed stockpiles to $1.58 trillion which is nearly 20 percent more than the recent low hit in September 2009, just after the recession ended. Sales grew faster than inventories in February, rising 0.7 percent.  This is a good sign because it is evidence that companies aren’t building too much inventory, which can result in cutbacks in production in the future.

“The pace of inventory building is consistent with what you’d expect to see in a gradual expansion,” said Tim Quinlan, an economist at Wells Fargo.  Businesses are rebuilding their stockpiles after cutting them over the summer in fear of a double-dip recession.  Steady inventory growth in the 1st quarter, as well as a narrower trade deficit in February and stronger retail sales, has lifted the outlook for growth.

American households “have the income to propel their purchases now that we’re seeing job growth,” said Russell Price, senior economist at Ameriprise Financial Inc., the third- best forecaster of retail sales for the 24 months ended in March.  “They have adjusted to the higher price of fuel.  The economy now needs to build on its own momentum.”

11 Percent Rise In New-Home Sales

Thursday, May 12th, 2011

New home sales rose in March, with the number of properties on the market at its lowest since the 1960s.  Additional gains will be stymied by competition from the market’s glut of previously owned houses.  Single-family home sales rose 11.1 percent to a seasonally adjusted 300,000 unit annual rate, according to the Department of Commerce, during a month when economists had expected a 280,000-unit pace.  Even with the March uptick, new home sales are just bouncing along the bottom.  Despite the good news, the number of houses sold still is 21.88 percent less than the level achieved one year ago.  The news was released by the U.S. Census in its monthly New Residential Home Sales Report for March.

“Investors continue to drive the market and were about 22 percent of the purchasers in March, up from 19 percent a year ago,” said economist Joel Naroff, of Naroff Economic Advisors, in Holland, PA.  Investors typically look for foreclosures or short sales.  “They love those cheap distressed homes, which now make up 40 percent of the market,” Naroff said.  “Given the tight lending standards cash buyers are more than welcome.  To get a Fannie or Freddie loan, which are the only games in town, a borrower has to have a credit score of about 760.  Before anyone gets excited and thinks housing is on the rebound, understand that we need to more than double the March sales pace to reach decent sales levels,” Naroff said.  “Prices remain soft and are down by about five percent over the year.”

According to Dirk van Dijk of the Wall Street Pit, “The March level was substantially better than the expected rate of 280,000.  The 11 lowest months on record (back to 1963) for new home sales have all been in the last 11 months.  We are down sharply from a year ago, and it is not like a year ago was a great time in the homebuilding industry either.  Relative to the peak of the housing bubble (July ’05, 1.389 million) new home sales are down 78.4 percent.  Inventories of new homes were down 1.1 percent on the month and are down 19.7 percent from a year ago.  Supply is at 7.3 months, down from 8.0 months in February, but up from 7.1 months a year ago.  While that is well off the peak of 12.0 months, it is still above normal.  A healthy market has about a six month supply of new houses and during the bubble, four months was the norm.”

The median price of new houses sold in March was $213,800, according to the Census Bureau.  “It’s a decent start to the spring selling season, but we’re coming off all-time lows here, so we’re not going to get too excited,” said Brett Ryan, economist with Deutsche Bank Securities.  “The overhang of foreclosures drags on new home sales.  Builders are waiting for a clearing process to take place.”

The housing market was either “little changed from low levels” or weaker across the country, the Federal Reserve said in its most recent Beige Book report.  The absence of a continued housing rebound is one of the reasons why policymakers will complete their $600 billion asset purchase plan and keep borrowing costs at nearly zero to encourage growth.

Last year was the fifth consecutive year of declining new-home sales. According to economists, it could take years before sales return to a healthy pace.  Slow new-home sales add up to fewer jobs in construction, which normally powers economic recoveries following recessions.  Each new home creates an average of three jobs for a year and adds $90,000 to the local tax base, according to the National Association of Home Builders.

Bernanke Sets Sights on the Growing Deficit

Wednesday, June 23rd, 2010

Ben Bernanke has the deficit jitters.  Federal Reserve Chairman Ben Bernanke is warning that – even as the nation struggles to recover from the worst recession in 75 years – Congress must deal with an “unsustainable” level of debt.  “Our nation’s fiscal position has deteriorated appreciably since the onset of the financial crisis and the recession,” Bernanke said in testimony before the House Budget Committee.

Although Bernanke admits that the deficit was a necessary evil designed to bring the nation out of a deep recession, it has to be addressed in the long term because of the European debt crisis.  The budget deficit gap will narrow as the economy improves and stimulus programs are phased out.  The Fed chairman still sees several drags on the economy.  First and foremost is the jobless rate, which stands at 9.7 percent nationally, as well as the housing market that is plagued by foreclosures and short sales – of which 4.5 million are expected this year.  The good news is that the Fed’s recently updated Beige Book found that consumer and business spending are up slightly.  There is limited growth in the manufacturing, non-financial services and transportation sectors.

The housing market is expected to remain flat, thanks to the expiration of government-funded subsidies.  According to the Mortgage Bankers Association, the number of people applying for mortgages has fallen to its lowest level in 13 years.  Tourism also is down, partly because of the Gulf of Mexico oil spill.  Inflation also is low, making it probable that the Fed will keep the benchmark U.S. interest rate close to zero.

Snowmageddon Didn’t Halt Economic Growth

Thursday, March 18th, 2010

Despite the Snowmageddon that crippled Washington, D.C. and much of the East Coast during February, the economy continued to grow at a modest rate.  This is the opinion of the Federal Reserve’s newly issued Beige Book report – officially known as the “Summary of Commentary on Current Economics Conditions by Federal Reserve District” — which is published monthly.Latest Beige Book report confirms that the economy is growing.

In terms of commercial real estate, the Beige Book notes that activity is still limited.  “Most Districts characterized commercial real estate and construction activity as weak or having declined further, but some Districts noted slight stabilization and a few signs of modest improvement.”  The Beige Book also noted that the snowy February kept prospective house hunters home in some parts of the nation.  According to the report, “Residential real estate markets improved in a number of Districts, although several Districts noted that activity softened or remained weak partly due to extreme winter weather.”

On the jobs scene, the Beige Book reports that “the pace of layoffs slowed in most Districts, but hiring plans still remained generally soft.”

Recession Coming to an End: The Fed

Wednesday, September 16th, 2009

Eleven of the 12 regional Federal Reserve banks showed signs of a stabilizing or improving economy during July and August, according to the Fed’s latest Beige Book report.  The Beige Book’s anecdotal evidence found that the nation’s worst recession in 70 years is coming to an end.  The Fed expects the economy to grow by three or four percent in the fourth quarter of 2009.  That stands in sharp contrast to the one percent decline from April through June, and the 6.4 percent contraction during the first quarter of the year.good-business-growth-2

In the latest survey, the Dallas region reported that economic activity had “firmed”. The Fed regions of Boston, Cleveland, Philadelphia, Richmond and San Francisco reported “signs of improvement.” In Atlanta, Chicago, Kansas City, Minneapolis and New York, the Fed reported activity as “stable or  showing signs of stabilization.  The St. Louis region was the exception, where the contraction’s pace “appeared to be moderating.”

“We are slowly on the road to recovery,” former Fed Governor Robert Heller told Bloomberg Television.  The Beige Book “confirms that we have turned the corner.”

Despite the Beige Book’s declaration that stabilization is occurring, it still found weakness in the commercial real estate market where little new construction is underway.  According to the report, “Several participants noted that banks still faced a sizable risk of additional credit losses and that many small and medium-sized banks were vulnerable to deteriorating performance of commercial real estate loans.”

Anecdotal Federal Reserve “Beige Book” Observations

Monday, October 27th, 2008

As if we needed it, even more evidence attesting to the ongoing economic slowdown came to light recently.  According to a Federal Reserve Board report referenced on Market|Watch and known as the Beige Book, the slowdown in economic activity in late September.

Among the findings are:

  • Factory activity is slowing.
  • Non-financial services – typically the backbone of economic activity – are slowing.
  • There is evidence that loan quality has actually depreciated because bank customers have moved their money into accounts that have the safety of deposit insurance.
  • Inflation pressures eased slightly, particularly in the retail sector.
  • The single bright spot was agriculture; the 2008 harvest was a good one.

Named for its nondescript color, the Beige Book is published to update the Federal Reserve on economic conditions just before its October 28 – 29 policy meeting.  The Beige Book is a series of anecdotal reports collected by the 12 regional Federal Reserve banks that gauge the state of the economy.  Although of interest, it has little influence on policymakers who rely more heavily on government reports in making decisions.  Another interest-rate cut is an expected outcome of the upcoming meeting.