"Contacts Are Less Optimistic": Fed's Beige Book Confirms Economy Is Slowing

Ever since April, the otherwise drab and colorless Fed Beige Book, was notable for one specific trend: a rising frequency of the word "tariff" (and its variations) with every subsequent report, confirming that in addition to the usual concerns businesses voiced to the regional Fed such as labor and prices, one of the growing worries amid local companies was the impact of trade war on future business. And, as we noted back in November, with the Trump-Xi summit fast approaching, the Beige Book confirmed that with no less than 51 mentions of the word "tariff", most companies were on edge over future trade prospects.

  • March Beige Book instances of word "tariff": 0
  • April Beige Book instances of word "tariff": 36
  • May Beige Book instances of word "tariff": 22
  • July Beige Book instances of word "tariff": 31
  • September Beige Book instances of word "tariff": 41
  • October Beige Book instances of word "tariff": 51

However, last month when the December Beige Book was released there was one notable development: we saw the first decline in mentions of "tariffs" since May, with the word tariff used only 39 times, a steep drop from October's 51.

Fast forward to today when in the latest, just released January Beige Book we find that this trend has accelerated even more as there was just 20 mentions of "tariffs", a stop drop from both December's 39, and October's record 51.

And while superficially this may be taken as a good sign, another, perhaps more ominous trend has emerged.

But first, a quick glimpse at what else today's Beige Book revealed: a casual glance of the summary page revealed few surprises. Indeed, according to the Federal Reserve, most regions reported growth at an overall modest to moderate pace even as the still-strong U.S. economy showed signs of slowing in recent weeks amid declining optimism.

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