The Daily Update: Beige Book / Powell / UK Growth

November’s Beige Book survey reported that while the US economy continued to expand at a reasonable pace, companies were raising prices at a rate of knots across a broad swath of the economy. The report, released eight times a year, surveys the 12 regional banks within the Fed’s system, and was more bullish in its outlook than the previous release in October.

The report noted, “Consumer spending increased modestly; low inventories held back sales of some items, notably light vehicles. Leisure and hospitality activity picked up in most Districts as the spread of the Delta variant ebbed in many areas”, adding, “Construction activity generally increased but was held back by scarce materials and labour. Non residential real estate activity increased widely, while residential real estate activity grew in some Districts but declined in others. Manufacturing growth was solid across Districts, though materials and labour shortages limited expansion”.

Yesterday was also the second day of Chairman Powell’s testimony in front of Congress. The headlines did not grab as much attention or drive market reaction as much as the previous day’s testimony did. He merely backed up his previous statement, reiterating the same exact prepared remark around tapering and inflation, that there will be a discussion in the December FOMC meeting.

Across the pond, the UK, according to the OECD, will enjoy the fastest growth among the G7 over the next couple of years. The Organisation for Economic Co-operation and Development (OECD) predicts Britain is on track for output to jump by 6.9% in 2021, with growth of 4.7% in 2022, then lower to 2.1% in 2023. In September the predictions were for 6.7% this year, and 5.2% in 2022. However, the fly in the ointment could be supply chain bottlenecks and a shortage of workers. It warned, “A prolonged period of acute supply and labour shortages could slow down the recovery by forcing firms into a more permanent reduction in their operating capacity”.

Globally, the OECD lowered its growth outlook for 2021 to 5.6%, from 5.7% previously, whilst next year’s forecast is unchanged at 4.5%. However, this could all be finger in the wind predictions as the report was compiled before the latest COVID-19 Omicron variant was discovered.