THE TAKEAWAY: Fed’s Beige Book released > Overall economic activity expanded “modestly”; Manufacturing and housing improved, while employment remained little changed > USD neutral
The latest Federal Reserve Beige Book, which was released today, revealed that the U.S. economy “expanded modestly” across all twelve Fed districts since the last report in August. Some improvements were seen in the manufacturing sector and housing market, though the labor market showed little change.
The Beige Book report, which is usually released two weeks before the Federal Open Market Committee (FOMC) meets to set monetary policy, offers anecdotal information on business activity collected nationwide that helps policy makers assess the condition of the economy and actions going forward.
Most of the Fed’s twelve regional banks indicated an improvement in residential real estate conditions as existing home sales and residential construction strengthened. Despite some districts reporting some weakening in manufacturing activity, on balance, conditions in the manufacturing sector had improved since August. Consumer spending was generally reported to be flat to up slightly while overall loan demand was “steady to stronger” in most districts.
On the labor market front, employment conditions were little changed and wage pressures remained “modest”, with “stagnant demand and uncertainty related to the upcoming presidential election, U.S. fiscal policy, and European debt issues cited by some [districts] as restraining hiring”. Price pressures remained contained with little change in prices for both finished goods and input prices, while some regions reported higher prices for agricultural commodities and petroleum-based products.
This latest edition follows the release of the Fed’s September monetary policy meeting minutes last week, which revealed that all but one FOMC member had agreed that the outlook for economic activity and inflation and concerns over the slow labor market recovery warranted additional monetary easing.
USDJPY 1-minute Chart: October 10, 2012
Chart created using Market Scope – Prepared by Tzu-Wen Chen
The U.S. dollar fell slightly against most its major currency counterparts in the initial minutes after the release of the Fed Beige Book. Bucking this trend, the greenback rose slightly against the Japanese yen, paring the earlier decline seen in the minutes preceding the report. At the time this report was written, the USDJPY pair was trading at 78.16 yen.
--- Written by Tzu-Wen Chen, DailyFX Research