The Federal Reserve released the latest beige book report today. The bottom line is there is modest to moderate growth basically across the board. Many of the sectors saw growth, while nearly all cited high energy prices as a source for future concern.
The districts reporting had an overall consensus that the economy is growing. The pace is somewhat slower than what most people would like, but there is definitely growth. This comes as good news after the latest jobs report showed that March added the fewest jobs since October. While the number of jobs did not increase, there is a shortage of highly skilled workers as reported by several sectors. Some south eastern districts reported a preference in hiring part-time and temporary labor in order to cut costs and due to a wary outlook on the future of employment needs. In all there do not appear to be very negative reports coming from any of the sectors.
The increase in growth is good news for a recovering economy. Most people would like to see more rapid growth, but that can actually lead to rapid inflation. Instead, the slower modest to moderate paced recovery is what is best for the economy in order to stave off both price and wage inflation. For the near-term most districts are optimistic. However, the one concern still nagging nearly everyone is the rapidly increasing energy costs. If not curtailed they can do the same harm as a rapid recovery pace causing inflation, higher prices for goods, and if left unchecked they have the potential to send the economy back towards a recession.
The Beige Book will provide the talking points for the next Federal Open Market Committee meeting (to be held two weeks after each Beige Book release). During the FOMC meeting the Fed will decide what to do with interest rates and the money supply. It has been indicated that interest rates will most likely stay low at least through 2013, so there should be no surprises coming from the next FOMC meeting.
The Beige Book is compiled based on anecdotal information provided from twelve districts across the country. These districts report on what they have seen the past six weeks in their economies, and give an outlook on how their local economies are expected to perform in coming weeks. The Beige Book is then compiled approximately 8 times per year and is one of the leading economic indicators to investors on the direction of the economy.