Beige Book Preview
The FED’s Beige Book is out tomorrow at 2:00pm EDT and given reports from regional Fed banks of late, expectations are not particularly high.
In last week’s FOMC minutes members noted that private payroll employment fell at a slower rate than earlier in the year, but also noted that industrial production contracted at a faster pace than in Q1. Members said real consumer spending had picked up “modestly” (stimulus checks commenced at the beginning of May) with exception of car-buying.
Despite the downbeat nature of the minutes, the board did move its 2008 GDP predictions higher. In April the FED predicted 0.2-1.2% growth in real GDP, but in the June minutes it upped the forecast to 1-1.6%.
PCE inflation was also upped from 3.1-3.4% to 3.8-4.2%, but the unemployment central tendency was left at 5.5-5.7%. The Philly Fed’s Plosser said today that he expects unemployment to decline to 5.25% by the end of 2009.
In short, FED governors and regional Fed presidents are expecting higher growth and inflation, and stable unemployment. Tomorrow’s regional report may reveal pockets of emerging strength or at least less downside.
Recall the 11 June Beige Book characterized the economy as “slower,” “soft,” “weak,” “sluggish,” and “nearly steady.” Not exactly inspiring stuff there.