Wednesday’s Fed Beige book is more of a deflation alert than anything else:
With few exceptions, Districts reported that prices at all stages of production were generally flat or falling. The notable exception to the downward pressure on prices was the widely-reported increase in oil prices.
For the most part, raw materials prices and product pricing were stable or declined, and little inflationary pressure is expected during the next 12 months.
So much for those mounting short-term inflation fears, huh?
This nonetheless is how AFP sums up the report:
WASHINGTON (AFP) - The slumping US economy is showing only spotty signs of recovery,with overall conditions still weak, the Federal Reserve said in its Beige Book report Wednesday. The central bank said reports from its 12 districts from mid-April through May “indicate that economic conditions remained weak or deteriorated further during the period.”
Echoing a comment from its April Beige Book, the Fed said that “five of the districts noted that the downward trend is showing signs of moderating.” Additionally, Fed officials indicate that anecdotal reports from a number of regions suggest that “expectations have improved,” but that contacts in the regions “do not see a substantial increase in economic activity through the end of the year.”
The report, to be used at the next Federal Open Market Committee meeting June 23-24, suggests the central bank will maintain its aggressive policy aimed at jolting the economy out of recession with ultralow interest rates and a massive amount of liquidity pumped into the financial system.
The US economy shrank at a 5.7 percent pace in the first quarter, based on the latest official estimate after a brutal 6.3 percent slump in the fourth quarter. The Beige Book said manufacturing activity “declined or remained at a low level across most districts” but that some districts “reported that the outlook by manufacturers has improved somewhat.”
Related link:
Optimistically, pessimistic in the US - FT Alphaville
