The future is beige

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Eight times a year the US Federal Reserve Bank produces a report on the state of the US economy based on anecdotal evidence from bank and branch directors and interviews with business contacts, economists, market experts, and other sources.

It’s known as the “Beige Book” and the latest edition is dominated by supply chain issues. The Japanese earthquake and tsunami has clearly had its impact across the US with widespread disruption – notably to the motor industry and high tech sectors.

In Chicago, it reports one contact suggesting that “that some automakers and their suppliers are moving planned summer shutdowns forward into June to give supply chains time to repair and thus be in better position for a ramp up in production in the third quarter”.

In Dallas, it says: “Inventories will likely be thin in coming months due to the effects of the tsunami on Japanese manufacturers supply chains.”

And in Boston, the survey says: “Some firms still report modest supply chain disruptions because of the earthquake in Japan (mostly semiconductor-related and other high tech inputs) or worldwide demand-related shortages of selected petroleum-related products.”

This might all be interesting detail, but it is what you would expect. What is unexpected is the impact it is having on the US economy – and that is less than you might imagine.

The Beige Book is clear: “Reports from the twelve Federal Reserve districts indicated that economic activity generally continued to expand since the last report, though a few districts indicated some deceleration. Some slowing in the pace of growth was noted in the New York, Philadelphia, Atlanta, and Chicago districts. In contrast, Dallas characterised that region’s economy as accelerating. Other districts indicated that growth continued at a steady pace.”

It’s all too easy to become focused on the immediate problems caused by these disruptions and miss the bigger picture.

But it’s time to look to the future – and the future is beige.


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