Bearish on the US Economy Yet? FED Beige Book and One Great Chart
As far as economic forecasts are concerned the Beige Book from the US Federal Reserve offers some pretty telling info (remember the US economy is not the Global markets).
US Economic Executive Summary:
Job growth is weak, income is flat and credit demand is weak; as such residential real estate still in decline. Meanwhile, Consumer spending modestly improved, prices have been decreased (vs. previous Month) for certain goods, cheifly gas/oil. In sum, today’s Beige Book report “implied little abatement of the still sizeable unused capacity in the economy. Thus, the report implicitly continues to argue for maintaining the current highly stimulative monetary conditions.” Low rates for a long time.
Doesn’t strike you as a particularly bullish report? Allow @gtotoy to provide some perspective here: http://chart.ly/v7wvk5m
Contrasting the two leaves me thinking this Summer 2011 lull in the markets is indeed the ‘mid-cycle slowdown’ pundits have mentioned ad nauseum. For more long term perspective, how about a 20-year chart of $SPX from @Xiphos_Trading : http://chart.ly/geuksff
With all of the stimulus and accomodative government action (ie the EU teeing-up a Can for the Kicking; ZIRP) how could we not re-test $SPY 1500. If we don’t see it on 2011, we’ll get there for Spring 2012 during the pre-election frenzy. Obama needs something to get his ass reelected.
For more Beige Book, here is a point-form Summary:
– U.S. Beige Book indicates greater moderation in growth
– Today’s Beige Book report indicated a weaker economic environment relative to June policy meeting. Specifically, the pace (of growth) moderated in 8 districts. In June, a moderation in growth was reported for 4 districts.
· Manufacturing activity continued to expand overall (steady to slowing growth). Some districts reported fewer supply problems to auto production that originated from the natural disasters in Japan.
· US Residential real estate activity was little changed remaining at still very weak levels. Non-residential real estate activity improved in six districts (Commerical real estate doing better as businesses are healthy overall).
· Disappointingly, loan demand was mixed: loan volumes decreasing in St. Louis and Kansas City partially offset strengthening demand in New York, Richmond, and Chicago.
· Agriculture was hit by both drought conditions in four districts and flooding in two districts.
· modest consumer spending growth in a majority of districts thanks to falling gas prices. Most of the improvement was in non-auto retail sales
· The energy sector remained strong with the Beige Book highlighting shale exploration in the Atlanta and Cleveland Districts.
· although most districts saw modest hiring increases, labour market is soft. With high unemployment persisting, it was reported that wage pressure remained subdued in most occupations (aka income is flat; want to see this rising!)
· Overall price pressures were reported to have moderated somewhat consistent with a slightly weaker assessment of the economic growth (less growth, less demand, better prices, more demand, more growth, higher prices, less demand/growth, rinse recycle repeat)
SOURCE: RBC ECONOMICS RESEARCH – DAILY ECONOMIC UPDATE – July 27, 2011