Federal Reserve Beige Book: Modest Economic Growth Amid Optimism | Image Source: Wikimedia.org
WASHINGTON, December 4, 2024 – The Beige Book of the Federal Reserve of November 2024 reveals a slight economic growth in most of the United States, with trade contacts expressing cautious optimism for increasing demand in the coming months. The report, based on data collected until November 22, provides a comprehensive overview of regional economic trends and highlights various levels of growth in the Federal Reserve districts.
Economic activity increased slightly overall, with three regions showing modest or moderate growth, offset by flat or slightly declining activity in two others. Consumer spending was stable, although businesses observed an increasing sensitivity to prices and quality among consumers. There is no doubt that spending on household furniture has decreased due to the limited mobility of households. The mortgage application was submitted, reflecting mixed signals from the housing market, as interest rate volatility persists. Commercial real estate loans reflect these trends, but remain accessible to businesses.
Labour market Trends
Employment levels were essentially stable, with delayed recruitment and low turnover in all sectors. While redundancies were minimal, companies exercised caution by expanding their lead account. Wage growth slowed down at a modest pace, although jobs in skilled trades and entry posts grew sharply. These segments are expected to continue to experience strong wage increases until 2025.
Despite overall stable employment growth, some districts have made slight progress. For example, Chicago reported slight employment growth, while Richmond observed stable conditions despite the disruptions of Hurricane Helene. Minneapolis and Dallas also recorded marginal increases in employment, reinforced by the expansion of the manufacturing and retail sectors.
Price pressures and inflation prospects
Price increases have been modest in most regions, with firms having difficulty shifting the increasing costs of entry to consumers. Entry costs exceed selling prices for many, compressing profit margins. Insurance costs have emerged as a remarkable expense for businesses. The report highlighted tariff concerns as an upward risk of inflation, although several districts noted a decline in the prices of some commodities. Trade contacts expect these price trends to continue in early 2025.
Sectoral outlook
The book Beige has identified specific sectors that have contributed to the nuanced economic landscape. Energy activity, particularly in the oil and gas sector, remained stable, but demand for electricity increased considerably as data centres expanded. This demand is expected to be met through investments in renewable energy in the coming years. Manufacturing performance was mixed, while growth was modest in some districts such as New York and Philadelphia, while others, such as Atlanta and Chicago, experienced declines.
Commercial construction activity increased modestly in Cleveland and Minneapolis, while real estate activity was in Chicago. Retail sales improved slightly in Atlanta but remained stable in other districts. Tourism declined modestly in Atlanta, but increased in Minneapolis, showing regional variations in consumer activity.
Regional highlights
The different districts reported different conditions that reflect their unique economic landscapes. The New York District experienced strong growth in manufacturing and stabilization of commercial real estate markets. Boston also faced a slight decline in activity, with mixed expectations in all industries. Philadelphia saw modest gains in the non-manufacturing sectors, while Cleveland experienced strong demand for business services and a slight increase in employment.
Richmond discovered disruptions of natural events, including Hurricane Helene and a port worker strike, affecting particular sectors. Dallas highlighted moderate growth in non-financial services, manufacturing and retail, with interest rate reductions and an optimistic outlook for business. The economy of San Francisco is stable, with a slight increase in wages and residential real estate activity.
Optimism Despite Uncertainty
Despite modest growth, expectations of future economic activity have generally been positive. Trade contacts in most districts have increased demand, albeit with caution, due to current uncertainties, including possible tariff policies. While investment activity is stable in most areas, the energy and renewable energy sectors continue to attract attention as key drivers of future growth. Consumer spending, although stable, has shown greater price sensitivity, encouraging companies to adapt their strategies.
The book Beige highlights the complex and varied nature of the American economy, with sectors such as energy, real estate and manufacturing that show both resistance and challenges. The report provides valuable ideas on regional dynamics and the overall economic climate, while the Federal Reserve follows these trends in 2025.
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