US Economy: Beige Book Bullish

16 January 2004

Cynics are unsurprised that in this year of a presidential election the US economic outlook appears upbeat and voter-friendly.

In keeping with this cheery mode, the US Federal Reserve's 'beige book' cites anecdotal evidence from its twelve district banks indicating continuing improvement in the economy. Sales over the Thanksgiving and Christmas period were also "positive across the country".

Nor are there yet any warning signs of inflation: prices charged by retailers and manufacturers remained "generally steady" despite increases in the cost of raw materials. This situation suggests there will be no voter-unfriendly rises in interest rates before the election.

The Labor Department was in similarly jovial mood. Although producer prices rose in December in the wake of a November decrease, there are few signs in the price index that that the recent US economic warm-up will give manufacturers much leverage to raise prices.

However, price restraint appears less attributable to moderation on margins than a squeeze on salaries and wages. The beige book notes that "wage pressures remained generally subdued."

Data sourced from: The Wall Street Journal Online; additional content by WARC staff