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One month after the October Beige Book found “little change” in the US economy even as the outlook turned decidedly gloomier, moments ago the Fed released the latest, November, Beige Book in which we find just why the outlook darkened: according to the Fed, economic activity in the US “slowed” since the previous report, with four Districts reporting modest growth, two indicating conditions were flat to slightly down, and half (or six) noting slight declines in activity. The slowdown was visible across both Fed mandates: price increases moderated across districts (though prices remained elevated) the Beige Book notes, while demand for labor continued to ease, as most Districts reported flat to modest increases in overall employment.According to Bloomberg, “taken at face value, that’s two-thirds of districts citing conditions that are ostensibly consistent with a mild recession.” In other words, the various regional Feds confirm that the trigger for a Fed rate cut is that much closer.Some more details, starting with overall economic activity:
Not surprisingly, the economic outlook darkened even more, with the report warning that the outlook “for the next six to twelve months diminished over the reporting period.”Turning to labor markets, we find that demand for labor continued to ease, as most Districts reported flat to modest increases in overall employment. Which is to be expected with the US heading fast for recession. Not surprisingly, wage growth slowed further, while layoffs rose and an even higher unemployment rate next week is virtually assured. Here are some more details:
Turning to prices, no surprise that here to increases “largely moderated” (even though prices remained elevated).
Turning to the specific regional Feds, we found these summaries notable
And one particular highlight: The Kansas City Fed notes that “bankers cited higher debt service costs and declining borrower cash flow as key risks facing their CRE books, particularly for loans maturing in the near term. Rising funding costs persisted as deposit balances continued to shift to higher-yielding accounts, with contacts reporting strength in time deposit products.”In other words, the Fed is now on notice that unless it cuts rates, a CRE accident is just waiting to happen.Finally, taking a visual approach to the data, we find that the mentions of inflation were the fewest since Jan 2022.
Perhaps the only silver lining in today’s data is that while we would expect mentions of “slowing” to jump in keeping with the broader report theme, what actually happened was a drop decline in the use of that word to a 5-month low, suggesting that a soft landing is still possible but only if the Fed is careful and eases into it. More in the full Beige Book (October Beige Book found “little change” in the US economy ).More By This Author:WTI Extends Losses After Across-The-Board Inventory Builds, Record Crude Production
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