We’ve talked a lot about green shoots in the U.S. economy recently.
A slew of recent data is pointing to a rebound in growth from a disappointing first quarter hampered by global headwinds. This week we gathered more clues on a potential recovery from an uptick in small business sentiment in the Federal Reserve’s (Fed) Beige Book.
Economic reports are important for clues on economic health and macro trends, but the Beige Book hones in on Main Street’s perspectives, offering valuable color on how larger trends are affecting U.S. businesses. At LPL Research, we maintain an indicator called the Beige Book Barometer (BBB), which helps us gauge Main Street’s sentiment by looking at how frequently key words and phrases appear in the Beige Book.
The BBB has climbed to 33 in April, its biggest gain since October 2017, as shown in the LPL Chart of the Day.
In the previous edition, the BBB fell to its lowest level since October 2011 (the peak of the European debt crisis), a drop we attributed to businesses struggling with uncertainty more than definitive signs of sustained weakness.
“U.S. businesses are still struggling with a complicated economic environment, but the clouds may be breaking,” said LPL Chief Investment Strategist John Lynch. “We still think lower Beige Book sentiment is a temporary consequence of heightened uncertainty, one that can be removed with a U.S.-China trade agreement.”
This month’s BBB jump was entirely from a resurgence in strong words, as weak words were unchanged from the previous edition. Mentions of weakness centered on a drop in global demand, a trend that we think should improve with progress in trade negotiations. Raw material costs have also risen amid global trade disruption, and respondents cited difficulty raising prices to account for higher expenses. The latest Beige Book, which is published eight times a year, was compiled in the weeks before April 8 and published April 17.
For more analysis on the most recent Beige Book, check out next week’s Weekly Economic Commentary, which will be published on Monday, April 22.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in this material may not develop as predicted.
All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. All performance referenced is historical and is no guarantee of future results.
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
This research material has been prepared by LPL Financial LLC.
To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.
The investment products sold through LPL Financial are not insured deposits and are not FDIC/NCUA insured. These products are not Bank/Credit Union obligations and are not endorsed, recommended or guaranteed by any Bank/Credit Union or any government agency. The value of the investment may fluctuate, the return on the investment is not guaranteed, and loss of principal is possible.
For Public Use | Tracking # 1-844412 (Exp. 04/20)