A Summary of the US Economy

The most recent report from the Federal Reserve Bank of Kansas City, the Beige Book, reveals that U.S. economic activity is no longer decreasing and is beginning to show slight growth in the 12 Federal Reserve Districts. Although some industry segments are beginning to recover, others still remain in decline.

 In September, the Federal Reserve Board (Fed) reported that while economic activity had continued to expand, the twelve Federal Reserve Districts had generally seen growth as "modest" or "slight" with contacts indicating a weaker or uncertain outlook for business conditions.

 Eight times a year, the Federal Reserve issues a report on the current state of the economy known as the Beige Book. The latest version was released in October.

 In September, people seemed to be spending more, likely due to the forthcoming holidays.

 Though wages remain lower than before, those with specific abilities that are rare are seeing some income. Hiring is proceeding at a moderate pace in some regions, yet other areas are still experiencing a substantial amount of unemployment and it appears unlikely to improve in the near future.

 The Beige Book reported that many districts showed restraint when it came to hiring and capital investment plans, while wage growth remained generally limited apart from a few instances in which companies mentioned having difficulty locating workers with the necessary skills.

 Retailers in Chicago, Philadelphia, and Richmond were somewhat reluctant to bulk up their inventories for the holiday season due to a lack of consumer confidence in the economy, even though businesses were beginning to spend a bit more.

 The production, extraction, and conveyance industries began to substitute their machinery, with the aim of being prepared when the economic climate regains stability.

 Hotel reservations rose in Atlanta, Boston, and Minneapolis, leading to optimism for a profitable holiday season in the tourism sector. San Francisco, on the other hand, was not so positive and reported a dismal outlook.

 In general, the report paints a more optimistic picture, even though there are some areas which are still feeling the repercussions of the economic recession.

 Ben S. Bernanke, Chairman of the Board of Governors of the Federal Reserve System, remarked during a September speech that the rebound from the crisis had not been as strong as expected. He further publicized that the recession was much more serious and the resurgence weaker than had been predicted.

 The economy is in a precarious state, with a fragile outlook.

 Jim McNerney, Chairman of the Business Roundtable and Chairman, President, and CEO of The Boeing Company, commented in a September press release that despite the strong business fundamentals that still remain in America, the outcomes of the quarterly survey indicated that CEOs had a more uncertain outlook on the economic environment and business climate.

 Since 2009, executives had become increasingly optimistic concerning the economy until the start of 2010, when their outlook shifted dramatically to a strongly pessimistic one that persisted throughout the year.

 The Economic Outlook Index experienced a noticeable decline in the third quarter of this year, decreasing from 109.9 in the prior quarter to 77.6, which was lower than the index in the fourth quarter of 2010 at 101.

 During the beginning of 2011, executives had a generally optimistic perception of the U.S. economic recovery; however, their attitude changed dramatically. Leaders of big businesses in the United States anticipate that orders, sales, and capital investments will decrease.

 The Federal Reserve reported that the Business Outlook Survey for September displayed signs of further decline in regional manufacturing activity, making the outlook even more dismal.

 A glimmer of optimism was indicated by the Federal Reserve's investigation, showing that the decrease in manufacturing in September was not as sharp as it had been in August. Employment figures showed some improvement, however orders and deliveries still had a negative connotation.

 In September, the August Manufacturing Outlook Index rebounded to -17.5, although still in a negative range. Even though the index improved, survey participants forecasted that the recovery will be gradual and production expansion will continue to lean downwards.

 In their September announcement, the Federal Reserve Bank of Philadelphia declared that the broadest measure of future activity had rebounded, which implies that the recent decreases should not persist over the ensuing six months.

 The October Business Outlook Survey offered reasons to be hopeful, albeit meager. According to the Federal Reserve's October announcement, the survey's outcomes suggested that regional manufacturing was beginning the process of recovery after a few months of decline. Additionally, the data indicated that employment had increased slightly in comparison to the previous month. The survey's broadest indicator of future activity had also seen a marginal enhancement from the prior month.

 It is unlikely that a double-dip recession is on the horizon.

 The prevalence of the internet has opened up a new world of opportunity for businesses. This has resulted in companies being able to reach out to a much broader customer base, as well as providing them with the ability to access new markets. The internet has allowed businesses to increase their revenue potential by connecting with a larger number of customers and potential customers than ever before. Additionally, the internet has enabled businesses to reduce their marketing costs and increase their efficiency.

It appears that a double-dip recession is not on the horizon at this time.

 Russell Investments, a Seattle-based investment consulting firm, reported in September that a large majority, 79 percent, of [investment] managers expressed that they do not think the United States is headed for a double-dip recession.

 Investment managers point to three positive features of U.S. companies as the reason for their outlook: strong balance sheets, sufficient profits, and reliable liquidity. They also recognize the Fed's low interest rates, decrease in oil costs, and weak dollar as influencing a full recuperation of the economy.

 Despite this, over half of the surveyed managers hold a view that the economy will not grow vigorously, but will be just slightly stagnant.

 A small minority of 11 percent of people are getting ready for a double-dip recession, while an additional 10 percent view the United States as already in the midst of one.

 Managers agree that the key to overcoming the recession is to generate employment opportunities and get people back into the workforce.

 Consumer buying power could be augmented if there is an improvement in consumer confidence. This is the next most important matter to consider.

 The U.S. housing market's revival was considered to have an impact on the chance of a recession.

 Rachel Carroll, the chief portfolio manager at Russell Investments, remarked in a September press release that they have observed a continuous stream of negative economic news and that this has had a profound effect on investors' trust in the markets, with notable volatility persisting.

Being Part of the Recession Talk

An October 2011 Economic Forecast on the Global Economic Intersection (GEI) blog raised the question of whether the American economy was about to dip into recession.

 The economists' assessment of an economy is contingent upon the indicators they take into account when concluding whether a recessionary phase is imminent, a nation is heading towards a recessionary period, or there is no indication that a recession is likely to occur.

 The GEI forecast did not conclude that the United States is in, or even on the brink of, a recessionary period. They stated, "Our indicators have not yet reached recession levels."

 GEI's outlook is advocating for a new approach to the current economic situation, one that does not rely upon traditional theories but rather requires a new set of ideas.

 The GEI article states that the New Normal economy has a dissimilar set of dynamics to any other economic system.

 Around the same period last year, a similar fragility had been seen in the U.S. economy. Thus, it is possible that the current weakness is just a seasonal variation.

 It was last year when the current economic weakness cycle was first detected, and this could be a seasonal effect of the New Normal, the GEI article suggested.

 Going forward, the GEI article made a point of noting, "In the previous year Econintersect highlighted the bad data and the quick downturn by declaring a 'recession watch'--just for the numbers to get better. This time around, the EEI [Econintersect Economic Index] has seen a more profound decrease--but two months have gone by with the data showing signs of betterment."

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