Wednesday, July 13 brought yet another view from the Federal Reserve. The Fed’s Beige Book is a summary of commentary on current economic conditions. It was prepared at the Federal Reserve Bank of St. Louis and was based on information collected on or before July 1, 2016.

The overall tone of the Beige Book is positive slow growth, but investors and economists need to consider that the data cutoff date may have drastically skewed how this report ended up. As of July 1, we did not yet know that the dismal May jobs report was going to see a massive snapback in June’s payroll gains. We also did not know that the post-Brexit selloff was going to be followed by a snapback rally that would be a 10-day run that would take the S&P 500 up 7% to new all-times highs. In some ways, the stock market has almost been fighting all the trends against it.

Another issue that economists and investors both need to consider is that the Beige Book sounds like a Federal Reserve report but it is not a report made by the Fed officials themselves. This summarizes comments received from business and other contacts outside the Federal Reserve System — and is not meant to be the views of Federal Reserve officials.

Again, the report is a slow growth and not leaning back into a recession. So what if there is close to $13 billion outstanding in sovereign debt trading at negative interest rates.

Wednesday’s Fed release notes the term “Brexit” on six occasions and the term “international” is used on seven occasions. That is more than you might have expected.

The twelve Federal Reserve districts opined that economic activity continued to expand at a modest pace across most regions from mid-May through the end of June. Regional and focused commentary was listed as followed:

• Business contacts in Cleveland reported a steady level of activity.
• Minneapolis reported that activity increased at a moderate pace.
• Labor market conditions remained stable as employment continued to grow modestly since the previous report and wage pressures remained modest to moderate.
• Pricing pressures remained slight (low inflation).
• Consumer spending was generally positive but with some signs of softening.
• Manufacturing activity was mixed but generally improved across districts.
• Real estate activity continued to strengthen, and banks reported overall increases in loan demand.
• Agricultural activity was mixed, but was deemed to be generally improving.
• The natural resources and energy sector has remained weak.
• The outlook was generally positive across broad segments of the economy including retail sales, manufacturing, and real estate.
• Districts reporting on overall growth expect it to remain modest.

FULL JULY 13 BEIGE BOOK

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