September 07, 2022 | 14:53
Fed's Beige Book Points to a Weakening Outlook
The latest Beige Book, prepared by the San Francisco Fed, noted that economic activity was unchanged since early July, on balance. That is, growth expanded at a “modest pace”. Consumer spending held steady while manufacturing grew. Meantime, hospitality and tourism saw “solid” activity. That's where most of the good news ends. Housing market conditions weakened “noticeably” amid rising interest rates, while auto sales were “muted”. And, looking ahead, the overall outlook remained weak, with contacts pointing to “further softening of demand over the next six to twelve months”.
On the labor market:
Bottom Line: The Beige Book highlighted that a modest economic expansion continued in mid-July though to late-August. While inflation slowed a bit in July, stirring underlying price pressures remained “strong” amid still-tight labor market conditions. Overall, the anecdotes in this report keep the Fed on track for yet another outsized hike at the September 20-21 meeting. A number of officials have already signaled that rates need to rise to restrictive levels and stay there for “some time”. Chair Powell will deliver remarks on Thursday and could set the stage for a 75 bp move in his last scheduled appearance before the upcoming Fed announcement.