Dec 3, 2020 - Economy & Business

Fed's Beige Book shows underwhelming economic growth

Illustration of a flower made out of dollar bills growing out of a crack in pavement
Illustration: Sarah Grillo/Axios

The Fed's latest survey of its business contacts around the country revealed a weakening labor market that could give the central bank grounds to ramp up its massive bond-buying program when its policy-setting committee meets later this month.

What happened: While most districts said they were still seeing a modest or moderate economic expansion, four districts described little or no growth.

  • The Philadelphia district as well as three of the four districts in the Midwest said that activity began to slow in early November as COVID-19 cases surged.
  • Banking contacts in multiple districts reported some deterioration of loan portfolios, especially in commercial lending into the retail and leisure and hospitality sectors, and said an increase in delinquencies in 2021 is widely anticipated.
  • Most districts reported that firms’ outlooks remained positive, but optimism had waned.
  • Nearly all districts reported that employment rose, but for most, the pace was slow, at best, and the recovery remained incomplete.

One level deeper: "Altogether, the December Beige Book is consistent with our view of a modest deceleration in economic activity in recent weeks due to new COVID-19 cases, increased restrictions on activity and waning fiscal support," Lewis Alexander, U.S. chief economist at Nomura, said in a note to clients.

The intrigue: Before the Beige Book's release, analysts at TD Securities noted, "We expect the Fed to take further easing action in December by extending the maturity of QE purchases."

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