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Bernanke Must Have Read the Beige Book

06/08/2012
Federal Reserve Chairman Ben Bernanke’s failure to commit to further quantitative easing in his Senate testimony on Thursday may have been more than “posturing.” I am rather certain that the Chairman, like me, has fully read through Wednesday’s release of the Beige Book. The current Beige Book evidence suggests that recent U.S. economic weakness might be transitory. The Beige Book data was not bad at all.
 
Before we get to the evidence, here is a description of the Beige Book, an economic report I previously have not commented on in this blog:
 
“The Beige Book is the template for FOMC meetings. It is released two weeks before each of the FOMC meetings. Contained within is a comprehensive summary of economic conditions within each of the Federal Reserve Districts. Although never confirmed, it is widely suspected that the current Beige Book helps the FOMC craft policy at its upcoming meeting.”
 
The Beige Book released on Wednesday, June 6:
 
•   Covers the period of April 3 to May 25, 2012
 
Overall Growth
 
•   Districts “Growing at a Moderate Pace”
      o  New York, Cleveland, Atlanta, Chicago, Kansas City, Dallas and San Francisco
•   Districts “Steady Growth”
      o  Boston
•   Districts “Growth slowing”
      o  Philadelphia
•   Districts “Neutral on Growth”
      o  Richmond, St. Louis, Minneapolis
 
Consumer Spending
 
•   Districts “Consumer Spending Up”
      o  Cleveland, Atlanta, Kansas City
•   Districts “Consumer Spending Flat to Up”
      o  Boston, Dallas, San Francisco, St. Louis
•   Districts “Consumer Spending Flat”
      o  Chicago, Minneapolis, New York, Philadelphia
•   Districts “Consumer Spending Flat to Down”
      o  Richmond
 
Home Sales
 
•   Districts “Up”
      o  Cleveland, St. Louis, Atlanta, Kansas City, Minneapolis, Dallas
•   Districts “Flat to Up”
      o  Boston, Chicago, San Francisco, New York, Philadelphia, Richmond
•   Districts “Flat to Down”
      o  None
•   Districts “Down”
      o  None
 
Other Notable Points
 
•   Manufacturing – 9 of 12 districts reported gains in production or new orders
•   Manufacturing – particular demand strength was evident from the auto and steel industries
•   Manufacturing – aircraft, semiconductors, high tech equipment, agricultural equipment, and construction equipment all reported steady demand
•   Manufacturing -  weak demand was cited within the coal industry
•   Employment at Manufacturers was mixed, with difficulty cited in finding “qualified workers”
•   Inventories of popular vehicles was defined as “tight”
•   Rather oddly, foreign visitors boosted tourism activity in Florida (Disney’s stock price (DIS) confirms the strength – Figure 1)
•   Ticket prices and attendance at Broadway theaters were strong, with revenues reported well above year-ago numbers
•   Hotel bookings in Boston and New York were strong
•   Advertising sales strength was cited in San Francisco and Philadelphia, and were overall flat to up
•   Apartment housing was strong in all districts
•   The majority of districts reported no improvement in home prices
•   Mortgage lending generally indicated slow to limited growth
•   Small business loans improved as did business loan demand (in particular from the energy, healthcare, and commercial real estate sectors)
•   Energy drilling expanded aggressively but with a shift toward wet-gas and oil, away from dry gas
•   It was noted that increased infrastructure investment was needed for the rise in domestic and Canadian energy supplies
•   Price inflation was modest
•   Information technology and engineering firms cited difficulty in finding highly trained or skilled workers to fill positions
 
Disney Prior 52 Weeks (Figure 1)

Source:  Bloomberg

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