While signs of a tightening labor market and concerns about tariffs continue to appear, Main Street has kept a positive outlook on the U.S. economy.
The September edition of the Federal Reserve’s (Fed) Beige Book, a survey that reflects business conditions across firms in the Fed’s 12 districts, suggests continued steady economic growth. LPL’s Beige Book Barometer (BBB) measures the difference between the number of times the word “strong” or its variants appear in the Beige Book and the number of times the word “weak” or its variants appear. When the BBB is declining, it suggests the economy is deteriorating; when it’s advancing, it suggests the economy is improving.
As shown in LPL’s Chart of the Day, the BBB indicates the number of “strong” words remains solid, while the number of “weak” words has hovered around its lowest levels of the economic expansion.
“Overall, Beige Book sentiment remains positive and reflects continued optimism on Main Street,” said LPL Research Chief Investment Strategist John Lynch. “Strong economic momentum and the benefits of fiscal stimulus continue to outweigh firms’ concerns about trade and inflation.”
Trade uncertainty is a prominent theme on Main Street, according to the Beige Book. Trade-related words appeared 81 times in the September Beige Book, the highest number of mentions since we began tracking trade mentions at the beginning of 2017. In 2017, trade-related words appeared an average of just over 13 times in each Beige Book.
Inflationary trends have also been under Main Street’s microscope recently. Words related to inflation rose to the highest level since we began tracking them in 2015. While wage growth is picking up, we view current pressures as manageable in the context of historical growth.
Beige Book sentiment reflects continued optimism on Main Street. However, we will continue to watch economic data for any impacts from trade tensions or inflationary pressures, as these two themes are two important sources of growing concern.
Check out this week’s Weekly Economic Commentary for more analysis on the most recent Beige Book.
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