The so called Beige Book (after the color of its cover) is produced eight times a year by the Federal Reserve Bank of Philadelphia. It is based on surveys of businesses in each of the 12 Federal Reserve Districts, and is often used by economists as a gauge of business activity at a regional level. Beige book comments are best examined over the longer term as business activity can be highly variable from month to month.
According to the Beige Book, economic activity has expanded moderately in all 12 districts since the previous Beige Book report,
Overall, holiday sales were reported as being modestly higher than in 2011, though sales were below expectations for contacts in many of the Districts. Expectations for future sales were positive but mild, particularly in Philadelphia, Kansas City, and Dallas. Tourism held steady or grew in all but one of eight reporting Districts.
Reports of manufacturing activity were mixed overall, with six Districts growing since the last Beige Book, three Distracts contracting, and two Districts reporting little or no change. In addition, existing residential real estate activity expanded in all Districts that reported; growth rates were described as moderate or strong in nine Districts. Contacts in the Kansas City District reported that increased lumber and drywall costs limited construction, causing a slight decline this period. Hurricane Sandy disrupted construction activity initially in New York, but this has since led to increased work for subcontractors on repairs and reconstruction. Reports of agricultural activity, as well as from the energy sector were mixed, although rain and mild temperatures delivered some relief from drought conditions to parts of the Richmond, Atlanta, and Chicago Districts.
Production of oil and natural gas held steady at high–sometimes record–levels in the Cleveland, Richmond, Minneapolis, and Dallas Districts. San Francisco reported that activity expanded to historic levels. Contacts in the Cleveland District reported that shale gas activity grew at a robust pace. In contrast, coal production declined
Labor market conditions remained mostly unchanged in all Districts and wages have been stable since the previous Beige Book and were most frequently described as contained or subdued. Overall, input price pressures appear to be stable.
The results from the Beige Book point to continued slow growth throughout the economy, with specific bright spots particularly in the mid-west. Most sectors of the economy appear to be growing but not fast enough to put upward pressure on either wages or prices. Where regional differences exist they appear to be mostly weather related.
We believe that continued slow growth in the economy will keep the pressure on the Federal Reserve to keep interest rates at ridiculously low levels forcing continued bond purchases on the open market. This should also keep unemployment rates from changing dramatically during 2013 which will keep downward pressure on labor costs. Pressure will continue on the dollar making imports more expensive and helping to stimulate exports to some extent. The fact that regional differences seem to be small suggests that outside of some specific states with exceptionally poor fiscal policies (read Illinois) competition across states will likely have little impact on tax and regulatory policies in 2013.