Beige Book Moderately Optimistic
- Apr 12, 2012
The latest “Summary of Commentary on Current Economic Conditions by Federal Reserve District,” otherwise known by its street name of the Beige Book, reported on Wednesday that “hiring was steady or showed a modest increase across many districts,” which may or may not contradict the party-pooping March jobs numbers reported by the government earlier this month. The reason for the uncertainty is that the official numbers are statistically calculated, while the Fed report is anecdotal, and thus the two are hard to compare.
The book noted that manufacturing remains energetic in most parts of the country, with gains especially reported in automotive and high-tech industries, and not enough skilled workers to fill all the positions being created. “Manufacturers in many districts expressed optimism about near-term growth prospects, but they are somewhat concerned about rising petroleum prices,” the Fed said (and as we all are).
As for real estate activity, the Beige Book observed that “residential real estate activity improved in most districts, though Cleveland and San Francisco noted that activity remained lackluster or at low levels. The construction of multifamily housing units, including apartments and senior housing, expanded in many districts.” The book characterized nonresidential real estate as “slowly improving,” “unchanged,” “steady,” or just plain “slow,” depending on which district it was talking about.
Multifamily the darling among mortgage lenders
The Mortgage Bankers Association reported on Wednesday that commercial and multifamily mortgage originations were up 55 percent in 2011 compared with the previous year, with lenders closing $184.3 billion in such loans. The GSEs and the FHA accounted for $57.6 billion of that activity, while life companies and pension funds recorded a volume of $49.3 billion.
The darling property category of the market? Multifamily, naturally, totaling $77.4 billion. Office properties were next, with a total of $34.4 billion. The lion’s share of that multifamily origination activity was by the GSEs and the FHA, for a total of $57.6 billion in 2011.
“Commercial mortgage lending continues to rebound from its 2009 lows,” Jamie Woodwell, the MBA’s vice president of commercial real estate research, noted in a press statement. “Originations for life companies, Fannie Mae, Freddie Mac and FHA were all strong, and banks, commercial mortgage-backed securities issuers and others also saw strong growth.”
Funds rate near zero till ’15?
In other Fed news, Vice Chair Janet Yellen told the Money Marketeers of NYU on Wednesday there would be considerable benefit to the U.S. economy in “keeping the funds rate close to zero until late 2015. This highly accommodative policy path generates… a notably faster reduction in unemployment than in the baseline outlook. In addition, the inflation rate runs close to the FOMC’s longer-run goal of 2 percent over coming years.”
That doesn’t make a nigh-zero funds rate until 2015 a done deal, but it’s a pretty strong hint of the FOMC’s thinking on the matter. Besides, Yellen said, the economy still needs the help. “I anticipate that growth in real gross domestic product will be sufficient to lower unemployment only gradually from this point forward, in part because substantial headwinds continue to restrain the recovery,” she said. The three main headwinds are housing, state and local government contraction, and lackluster growth in the rest of the world (that means you, euro zone).
Wall Street cheered up a bit on Wednesday, possibly in response to Beige Book cheerfulness, such as it was. The Dow Jones Industrial Average gained 89.46 points, or 0.7 percent, while the S&P 500 was up 0.74 percent and the Nasdaq increased 0.84 percent.