Fed Beige Book Shows US Expanded at Modest Pace

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Bloomberg May 29 22:50 · 15.8k Views

The US economy expanded at a “slight or modest” pace across most regions since early April and consumers pushed back against higher prices, the Federal Reserve said in its Beige Book survey of regional business contacts. Mike McKee reports.

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Transcript

  • 00:00 The Fed Beige Book, of course, our focus on this Wednesday.
  • 00:03 Let's get to it with our own Bloomberg News International economics and policy correspondent Michael McKee.
  • 00:07 He's joining us here in studio.
  • 00:09 All right, so it's just out.
  • 00:10 You've been reading it
  • 00:12 furiously.
  • 00:13 If you were going to describe it to somebody you'd call it beige.
  • 00:17 I mean, this was written by A2 handed economist.
  • 00:21 National economic activity continued to expand from early April to mid-May.
  • 00:25 However, conditions varied across industries and districts.
  • 00:29 That's kind of that's the first sentence which is always sums up what the report says.
  • 00:33 So
  • 00:33 conditions vary.
  • 00:34 Most districts reported slight or modest growth
  • 00:38 to noted no change in activity.
  • 00:40 Retail sales flat to up slightly, which is what the data have shown us,
  • 00:45 and auto sales roughly flat.
  • 00:47 They say travel and tourism strengthened,
  • 00:50 but of course, we're getting into that spring break season that this covers, so
  • 00:54 that's not a surprise either.
  • 00:56 Go down to labor markets.
  • 00:58 Employment rose at a slight pace.
  • 01:00 Overall,
  • 01:01 8 districts reported negligible to modest job gains.
  • 01:05 Of the remaining 4 districts reported no change.
  • 01:08 Better later ability availability they say although some shortages remain
  • 01:13 employee turnover has
  • 01:15 priest and
  • 01:15 one noted that employers bargaining power has increased hiring plans mixed.
  • 01:21 I
  • 01:22 mean this is
  • 01:23 the painters are coming in they're painting the studio base
  • 01:27 in honor.
  • 01:27 What does this tell you about what they're going to do Prices increased at a modest pace.
  • 01:32 Contacts in most district noted consumers pushed back against additional price increases which led to smaller profit margins.
  • 01:40 Okay, so
  • 01:42 net net
  • 01:44 given what you've read by the way, there are 48 more pages that we haven't yet talked to.
  • 01:49 Put everybody to sleep.
  • 01:52 Fed friendly or not Fed friendly,
  • 01:54 it's fed friendly.
  • 01:55 If you
  • 01:56 think that the Fed is looking for support for doing nothing because this basically tells you that the economy is still
  • 02:02 plugging along.
  • 02:04 There's no negative adjectives in here.
  • 02:07 The
  • 02:07 positive adjectives are very beige,
  • 02:10 as we've been saying.
  • 02:11 This is the three day weekend version of the page book.
  • 02:13 Yeah.
  • 02:14 You know,
  • 02:15 it tells you what you already knew about the economy and a good mic in that there's no like, wait a minute, you know, we're seeing inflation flare up here or something.
  • 02:23 Yeah,
  • 02:23 if you take two things away, one is that they're not
  • 02:27 seeing
  • 02:28 a continued
  • 02:29 rise in inflation, Modest pace is, is what they say,
  • 02:33 and that there's no sign that the economy is falling off a Cliff.
  • 02:38 So
  • 02:39 they don't have to do it.
  • 02:41 They don't have to raise rates to choke off inflation.
  • 02:43 They don't have to cut rates to
  • 02:44 prop the economy.
  • 02:45 No stag inflation, no stag, no stag, no
  • 02:48 inflation.
  • 02:50 You know, it's
  • 02:51 it's not bad,
  • 02:53 but
  • 02:54 you know, not that exciting.
  • 02:55 What about this part where it says that consumers push back against additional price increases, which led to smaller profit margins as
  • 03:02 input prices rose on average.
  • 03:04 What power does the consumer have to push back on price increases?
  • 03:07 Well, you stopped buying basically.
  • 03:09 And there
  • 03:09 the
  • 03:10 retail part noted that people
  • 03:12 had pulled back
  • 03:14 on buying.
  • 03:16 And so
  • 03:17 I think probably
  • 03:19 retailers are reporting that customers are not buying XY and Z because those things went up in price
  • 03:26 at this point.
  • 03:27 So,
  • 03:28 you know, reasonably good news on that score
  • 03:32 and just listen, no surprise because it's beige.
  • 03:34 This Beige Book
  • 03:36 I'm looking at, you know, the treasury curve.
  • 03:37 I know we've had a bunch of auctions and some disappointment there,
  • 03:41 but you've got a 10 year note.
  • 03:42 It's 461 to your note with the other 498.
  • 03:44 So pretty much where they were, I think exactly where they were prior to the Beige Book.
  • 03:48 And on the equity side of things, not seeing really any reaction as well,
  • 03:51 but it was just curious.
  • 03:53 Yeah, I don't know.
  • 03:54 So then
  • 03:55 I
  • 03:55 before we move on
  • 03:56 in terms of the Beige Book, Mike, how do you use it?
  • 03:59 Is it, is it important in that it's more current information and that's a good thing or like, how do you?
  • 04:04 Well, is it not?
  • 04:05 It's, it's relatively current.
  • 04:07 It's since the last
  • 04:09 Beige Book, since the last Fed meeting.
  • 04:11 So it gives you
  • 04:12 a snapshot of
  • 04:14 what was happening over the last month or so.
  • 04:16 But we've talked to a lot of Fed bank presidents lately who have said the same thing.
  • 04:21 This is what CEOs and consumers are telling us in our districts.
  • 04:25 So there's no surprise here.
  • 04:27 Once in a while you make might get a big surprise.
  • 04:30 But for all the talk about how much
  • 04:32 Fed officials talk and whether it's too much or not,
  • 04:36 a lot of the data that we get now
  • 04:38 is, is is not a surprise because that's what they've been telling us is going to come.
  • 04:43 OK, Speaking of data, we got consumer sentiment,
  • 04:46 consumer confidence, excuse me, yesterday.
  • 04:48 We get the Fed's preferred inflation reading later this week.
  • 04:51 We got Beige Book today.
  • 04:53 How are you thinking about all of it?
  • 04:54 The one that matters is the
  • 04:56 consumer is the
  • 04:57 the
  • 04:58 PCE in.
  • 05:00 Inflation number,
  • 05:01 personal consumption index,
  • 05:03 and it's what the Fed uses as their target, the headline number.
  • 05:08 So
  • 05:09 they definitely want to see progress there.
  • 05:11 And
  • 05:11 we've talked about the inflation nerds who go through and figure all this out to make their
  • 05:16 forecasts.
  • 05:17 And
  • 05:18 several of them think that we might see a better than expected number, which would be
  • 05:23 good news for the Fed.
  • 05:24 And, of course, it would get the markets
  • 05:26 maybe moving again one way or another as they try to take advantage of whatever they think the Fed will do.
  • 05:32 Yeah.
  • 05:33 Speaking of Fed speakers, Kashkari,
  • 05:36 certainly something that's being read on the Bloomberg Terminal today.
  • 05:38 Minneapolis Fed President Neil Kashkari
  • 05:41 talked about that.
  • 05:42 You know, the Fed hasn't ruled out
  • 05:44 entirely additional interest rate increases, but we were talking before we got going.
  • 05:48 You said not nothing new, like he's
  • 05:50 nothing new from him.
  • 05:51 And John Williams has said it.
  • 05:52 Even Jay Powell talked about it at his last press conference.
  • 05:58 Traders got a trade, so it's something for them to trade on.
  • 06:02 But if you look at what he actually said, he
  • 06:05 said we're not ruling out anything he didn't say we're considering.
  • 06:09 And that's the same language, basically, that
  • 06:12 everybody
  • 06:13 who's talked about it has used.
  • 06:15 It's their job to
  • 06:17 be prepared to do whatever is necessary.
  • 06:20 It's kind of a beigie day.
  • 06:22 Well, one more thing.
  • 06:22 We want to.
  • 06:23 Yeah.
  • 06:23 Speaking of jobs,
  • 06:24 a new job for a Beth Hammock, a Goldman Sachs, a veteran over at the Federal Reserve Bank of Cleveland.
  • 06:31 What do we know about her?
  • 06:32 Well, she's been on Wall Street for 30 years,
  • 06:36 Goldman and has had a variety of jobs there.
  • 06:39 She left in February at a time when a number of women were leaving Goldman because they were feeling like
  • 06:46 Goldman was not supporting women moving up in the hierarchy there.
  • 06:50 So it's interesting that she ends up with this job.
  • 06:53 But she worked,
  • 06:55 she was on the fixed income side
  • 06:58 and on a trading desks for most of her career.
  • 07:00 Goldman and she was the head of the Treasury Borrowing Advisory Committee,
  • 07:05 which is a group of
  • 07:07 prominent Wall Street bond people who advised the Treasury on
  • 07:12 how much debt to sell, how to sell it.
  • 07:14 You know,
  • 07:15 the buybacks that
  • 07:17 just took place.
  • 07:18 We probably have a result on that
  • 07:22 right now.
  • 07:23 This is the first of their buybacks since 2000.
  • 07:26 And they
  • 07:27 I don't see a result yet, but
  • 07:30 it should come out soon.
  • 07:31 They're buying back
  • 07:32 Treasuries to create liquidity in the markets.
  • 07:35 And that was one of the things that the Treasury Borrowing Advisory Committee
  • 07:39 suggested.
  • 07:40 So she's got a lot of
  • 07:42 market experience.
  • 07:43 Yeah.
  • 07:44 And that's relevant.
  • 07:45 Good.
  • 07:45 Help the Fed as they go forward.