All twelve Fed Districts expanded over the July to mid-August period, according to the latest Beige Book. Six Districts reported a moderate pace of growth, five reported modest growth, while the Cleveland District noted only slight growth. Across most sectors, respondents expected growth to continue at its recent pace, although the Kansas City District reported mixed expectations.
"Overall it appears that economy activity at the start of the third quarter progressed largely in line with the pace at the end of the second quarter. While it is currently tracked that real GDP growth is roughly 2.5%, below the 3.7% pace seen in Q2, the positive tone is another indication of relatively robust domestic activity", says Economics TD.
With the survey period ending on the 24th of August, there was little overlap with the recent turbulence in financial markets. Still, the strong dollar and Chinese slowdown are evidently weighing on activity, particularly in the manufacturing sector.
"Robust domestic activity, such as in construction and auto-related industries, remain a clear driver for the economy. While the U.S. is not immune to overseas turbulence, progress in the labor market, elevated consumer confidence, and nascent signs of wage growth suggest continued economic growth. Inflation continues to remain extremely subdued, however supply-side pressures in several areas provide evidence that core inflation will, in time, pick up", added Economics TD.
