US Beige Book: Economy Remains Weak, But Signs of Moderation Emerge

The Fed's Beige Book prepared based on data reported prior to June 2 reported that economic conditions remained weak or worsened through May. However five of the Fed districts saw the downward trend in activity showing some signs of moderation.

The current conditions remaining weak related to credit conditions, retail sales and commercial real estate. The report found that credit conditions remained “stringent” or “tightened further.” On the retail sales the characterization was “soft.” In terms of real estate, the report was decidedly negative on the commercial front, as it continued to weaken in all districts.

On the brighter side, with respect to residential real estate, though the report described it as “weak,” it reported that contacts in some areas reported an “uptick in sales.” Labour markets “stayed weak,” but some districts saw signals that employment losses may be “moderating.” Additionally, several districts saw manufacturers' outlooks improve.

With regard to inflation, prices at all stages of production were reported as “flat or falling.” The notable exception cited was the increase in the price of oil. Additionally, the report noted wages to be similarly “falling or flat.”

Overall, today's report paints a picture of a weak economy whose downward trajectory is showing signs of moderating. In its upcoming scheduled June 23 -24 meeting, we expect the Fed to maintain its target rate in the 0% - 0.25% range while focusing on both quantitative and credit easing.

RBC Financial Group
http://www.rbc.com

The statements and statistics contained herein have been prepared by the Economics Department of RBC Financial Group based on information from sources considered to be reliable. We make no representation or warranty, express or implied, as to its accuracy or completeness. This report is for the information of investors and business persons and does not constitute an offer to sell or a solicitation to buy securities.