A report released Wednesday from the U.S. Federal Reserve suggests a slightly weaker pace of growth in the U.S. economy heading into the new year, but economists don’t expect it to derail the path to more normal monetary policy.
According to RBC Economics, the Fed report, known as the beige book for the colour of its cover, “had a slightly less upbeat assessment of overall economic conditions than the previous report.” Most districts continued to report a “modest” or “moderate” pace of growth, although growth slowed slightly in oil-producing regions due to the impact of lower oil prices.
TD Economics says that the report found that consumer spending increased in most districts, manufacturing activity expanded, and credit demand grew too; while construction activity was largely flat. Additionally, payrolls expanded moderately and prices increased only slightly in most districts, it says.
“Our overall impression is that the pace of growth has perhaps dialed back a notch over the most recent period,” TD says. “This is not surprising in light of the fact that the economy grew 5% in the third quarter, a pace which was unlikely to be maintained. That being said, the pace for continued real GDP growth in the area of 3% over the near future remains intact.”
RBC also says that today’s report “had a slightly less upbeat tone”, but that it still suggests that the U.S. economy is maintaining a good degree of momentum heading into 2015. “The report indicated continued expansion in many sectors of the economy although perhaps at a slightly slower pace overall than in recent quarters,” it says.
Overall, RBC says that the report should not affect the timeline for the normalization of monetary policy. “We continue to expect that the Fed will begin to raise the rate in June 2015,” it says.
TD expects the Fed to remain on hold until September.