U.S. Economy Showing Modest Expansion

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According to the third quarter report issued by the Federal Reserve, nicknamed the ‘Beige Book,’ which is a regional survey that tracks economic trends in individual districts across the country, the economy is still expanding, although quite slowly.

Mixed Signals

Despite the generally gloomy economic climate globally and the difficulties such as extreme financial market volatility and slow world economic growth, U.S. businesses for the most part seem to be navigating the rocky economic waters quite well.

Nine out the 12 districts included in the report showed positive signs of growth, ranging from modest to moderate while only three reported a weakening in their economies. There was also a distinct lack of skepticism by employers about the near term outlook with many districts reporting that they now have labor shortages, particularly in skilled labor but without significant wage pressures.

Housing also improved in most regions while manufacturing continues to lag behind, dragging some of the other, more positive figures, down. However, even though manufacturing is generally weaker across the board, certain sectors, such as auto, aerospace and transportation are showing strong growth in many regions around the country.

Biggest Issues

One of the biggest complaints coming out of the survey was that many districts are being hit by the strong dollar which is holding back exports of manufactured goods, while making it cheaper to import foreign goods. This means that despite the continuing increase in consumer spending, a lot of that increase is being spent on cheaper imports.

The tourism industry is also being hit by the higher dollar as many people choose other destinations this year until the surge in the dollar’s value subsides. This impact has been particularly felt in areas like New York, where tourist revenues are significantly down. The weak Canadian dollar has also impacted the States near that border which rely on an influx of Canadian tourists and retails shoppers each year.

While overall, the report is positive, its mixed message will do little to help the Federal Reserve as it continues to chew on the issue of when to raise rates.

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