Beige Book punishes markets
The Fed’s latest Beige Book reads like a tragedy.
The book is published eight times each year and summarizes economic conditions in each Federal Reserve District (there are twelve). The Beige Book contains a ton of data. In a nutshell, economic activity weakened across all Districts. Below, I have summarized the results from several components.
Consumer Spending and Tourism: Weakened in nearly all Districts.
Business Spending: Weakened in most Districts.
Nonfinancial Services: Weakened in most Districts.
Manufacturing: Lower in most Districts.
Real Estate and Construction: Weakened or remained low in all Districts.
Banking and Finance: Tightened credit in all Districts that reported data for the category.
Agriculture and Nartural Resources: Favorable in most Districts that reported data for the category.
Prices and Wages: Inflation pressures eased in most Districts, wage pressures remained limited in all Districts (with the exception of skilled labor in a few markets).
Pretty grim. To makes things worse, the contents were released shortly after the Commerce Department’s report that retail sales fell 1.2 percent in September. Analysts expected a drop of 0.7 percent.
This disastrous data set the stage for a tumultuous afternoon. The news was definitely bad but, much of it shouldn’t have been that great of a shock. But, the markets reacted violently: the Dow shed almost 8 percent, while the Nasdaq lost 8 percent and the S&P 500 lost 9 percent.
These crazy swings are definitely inappropriate but until there is enough information (on the bailout and the central bank’s actions to rejuvenate the credit markets) to react appropriately, the wild days will continue. Although, the volatility seems to have no end I think we may be re-approaching the bottom. I’m looking to the credit markets for more clues!
Tags: beige book, dow, economic data, Federal ReserveRelated Stories
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