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The Federal Reserve a bit earlier this afternoon issued its Beige Book economic summation of conditions across the country, and the nation's lead bank essentially found that about a third of the nation was experiencing somewhat slower growth during September and early October, with only scattered effects from the government shutdown.

In truth, though, the impact from the aforementioned shutdown is hard to quantify at this time, as the closures only commenced on October 1st. Should the partial government shutdown last much longer--and signs were hopeful as this report was released that the Congress was making progress in at least effecting a short-term deal to re-open the government--the penalty could be much more severe over time. In fact, consumer sentiment surveys are already showing some deterioration in confidence due to the dysfunction on Capitol Hill.

As to the report, which will now be used by the lead bank in helping it formulate monetary policy at its next FOMC meeting, which is scheduled for two weeks from yesterday, our thinking is that the Fed will eschew any diminution in monetary accommodation at that time. That is because of the dangers engendered by the government closures and the debate over the possible catastrophic failure to raise the ceiling on this nation's $16.7 trillion of indebtedness. Meanwhile according to this survey, four of the 12 Federal Reserve Districts reported that growth had slowed in the period. Overall, though, the Beige Book reported a continuation of the same "modest to moderate" growth that has been in place for most of the year.

Breaking the report down by region, eight of the 12 Districts reported similar growth rates in economic activity as during the previous reporting period, while growth slowed in the Philadelphia, Richmond, Chicago, and Kansas City Districts. No areas noted any pickup in economic momentum. On balance, consumer spending continued to increase in most Districts, as did travel and tourism, business spending, payrolls, nonfinancial services, and manufacturing.

This survey, always of some interest to economists and financial market participants alike, is taking on added significance this time given the paucity of hard economic news coming out of Washington due to the shutdown. Of note, the latest monthly reports on employment, unemployment, housing starts, the trade balance, industrial production, and factory usage all have been delayed by the closures.

On the whole, this was a selectively disappointing report, and it increase the chances, which already were quite high, we think, that the central bank will stay the course on its accommodative asset purchases for at least one more meeting.       

At the time of this article's writing, the author did not have positions in any of the companies mentioned.