Beige Book Shows Moderately Positive Economic Conditions While Consumer Sentiment Reveals Loss of Confidence

The Federal Reserve’s January 2019 Beige Book shows a general increase in economic activity, while the labor market remains tight and input costs are on the rise. The University of Michigan revealed that consumer sentiment fell to its lowest level in over two years, according to its Survey of Consumers. The ongoing government shutdown and market volatility were the leading factors. Also, the Labor Department released its import- and export-price indices for December, which both fell during the month. Year over year, import prices had their largest drop since September 2016.

• The Federal Reserve released its January 2019 Beige Book, the Bank’s commentary on current economic conditions. The report summarizes that, overall, economic activity increased throughout the U.S. with eight of the twelve districts reporting modest to moderate growth. Manufacturing activity has continued to expand, albeit at a slower rate, particularly within the energy and auto sectors. Also of note is that employment has increased throughout the nation and that employers are struggling to find workers in the tight labor market. Prices increased modestly to moderately in most districts. Firms’ input costs are on the rise, but they are unsure about their ability to pass them on to consumers. Higher tariffs were commented as a contributing factor.

• U.S. consumer sentiment has fallen to its lowest level in two years, according to the University of Michigan Survey of Consumers. The report cited the ongoing government shutdown and financial market volatility as contributing factors to the decline. Falling 7.6 points to 90.7, consumer sentiment yet remains relatively high. However, an element of fear in the economy can be the only factor needed to slow down growth. If consumers become uncertain about the economic outlook and spend less accordingly, the lower consumer demand could put the brakes on economic productivity and output.

• The Department of Labor revealed last week that both its import and export price indices declined in December. U.S. import prices fell 1.0 percent after falling 1.9 percent in November. When measured year over year, import prices fell 0.6 percent, the largest drop since September 2016. When excluding fuel imports, the index experienced no change for the month. Prices for import fuel fell 9.2 percent to close out 2018. Also, export prices fell 0.6 percent following a 0.8-percent decrease in November. Excluding agricultural exports, one of the nation’s largest export categories, prices fell 1.1 percent. Agricultural export prices increased 3.9 percent, a positive sign for American farmers.