Question

Write a summary on the economy based on the Beige Book of the Federal Reserve for the months from July, August and September 2018. (You can read the summary of the beige Book for three months without going into details about each Federal Reserve District). Your summary should include the economic assessment of Banking and Finance, Employment, Manufacturing, Wages & Prices,

Answer 1

Manufacturing conditions softened at the end of the fourth quarter, but many contacts reported that this was largely a result of the usual seasonal slowdown. Continued uncertainty about international trade policy and volatility in financial markets may dampen demand in 2019, and contacts signalled that customers' capital expenditures are slowing. They also acknowledged that some of the strength in 2018 was driven by orders being pulled-ahead amid concern about future price increases, which have now come to pass or will be implemented in early 2019. The outlook for conditions in 2019 remains fair.

Real Estate and Construction
Residential builders and realtors reported stable demand in the current period, a break from a trend of softening demand for housing in the recent survey periods. While decreasing home affordability weighed on customer demand over the past year, a slight drop in mortgage rates spurred some demand recently. The decrease in home affordability was driven by rising interest rates and also by rising selling prices as builders boosted prices to cover their increases in wages and non-labor costs. Realtors noted decreased demand from first-time homebuyers. Housing inventory was stable. Residential builders expect worsening demand both in the first quarter and in 2019 overall.

Conditions in non-residential construction continued to be strong and improved slightly during the period. Demand from the industrial and education sectors was noted to be especially strong. Backlogs remained elevated and were increasing. Commercial real estate developers reported stable conditions. Most non-residential builders were optimistic about growth in the first quarter, and commercial real estate developers expect stable conditions. Non-residential builders expect moderate growth in 2019 overall. Commercial real estate developers' outlooks for 2019 were mixed.

Financial Services
Banking conditions softened slightly, driven by seasonality in commercial real estate, mortgage, and auto lending. Business inquiries were steady, and large and middle-market firms continued to seek financing for plant equipment and mergers and acquisitions. Volatility in financial markets and political uncertainty have had a negative effect on consumer and business confidence and cloud the outlook for loan demand in the coming quarter. Some bankers indicated that rising interest rates may also dampen demand.

Nonfinancial Services
Activity in nonfinancial services increased at a modest pace. Professional and business services firms noted increased demand, especially in the information sector, in which firms reported regular year-end increases in purchases of software and digital technologies. Freight contacts noted that while demand remains high, capacity constraints continued to limit growth in the industry, and while most freight contacts reported stable demand during the period, some trucking contacts noted softer demand compared with that of the previous quarter because of the pull-ahead of imports from China. Several contacts anticipate continuing high levels of activity, but some reported cautious optimism about the near future.