Last week's Beige Book noted that "economic activity increased in most regions of the country since the previous report." Here in the Sixth Federal Reserve District, we wrote that:
On balance, the Sixth District economy expanded at a modest pace from mid-February through March. Reports across sectors were optimistic and most business contacts expect near-term activity to grow at a moderate pace.
How did the Atlanta Fed come to this conclusion? It is a combination of several inputs, including a careful analysis of what our business contacts reported to us in a series of one-on-one meetings held throughout the region. But we also factor in what we hear from broader audiences, such as public speeches, presentations to professional or community groups, and industry- or geographic-specific meetings throughout the region.
Atlanta Fed economists and regional executives connect with their communities on a frequent basis. Such an approach allows us to reach a broad audience, and although we do not have the opportunity to perform deep dives like we do in our one-on-one meetings, we do get a good sense from the audience just how the local economy is performing.
For example, Adrienne Slack, our regional executive in New Orleans, delivered two talks on the Gulf Coast, one to a local group of businesses and one to an audience made up of businesses from throughout the country. What she heard confirmed our analysis that the economy in this region was performing somewhat better than the nation as a whole. She reported that:
The tenor of the Gulf Coast audience was optimistic and inquisitive about our thoughts regarding our forecast and the staying power of the recovery. The national audience was also keenly interested in our outlook; however, their own perspective was less optimistic. They too were seeing encouraging trends but not the growth and investment currently at play along the Coast.
Chris Oakley, our regional executive working from our Jacksonville Branch, delivered a talk in Tampa where he noted some concern regarding the level of confidence in our economic forecast. Chris was asked, "What makes you more confident that projections for growth in 2014 will come to fruition as compared to the last several years?" Chris responded that we were more confident that the economy would improve because of several factors, including:
- Consumers have adjusted to the reinstatement of the 2 percent social security payroll tax;
- There are no looming fiscal deadlines in the short term (debt ceiling, fiscal cliff, etc.); and
- Economic weakness among some of our foreign trading partners appears to have abated.
"This environment is allowing for greater visibility and confidence, which translates to more investment and spending," Oakley said, echoing comments made by Atlanta Fed President Dennis Lockhart in a March 6 speech at Georgetown University:
Let me expand on my claim that the economy's fundamentals are stronger. I think basic conditions in several key sectors of the economy are much improved compared with earlier in the recovery period. I would cite banking, housing, energy, and manufacturing as examples.
Household balance sheets are much healthier now thanks to reduced debt, higher saving, and stronger asset prices, including higher home values.
Business and financial-system leverage has been significantly reduced from levels precrisis that were demonstrated to be unsustainable. Business profitability is good, and firm balance sheets are generally liquid.
Likewise, fiscal imbalances, while not solved for the long term, are somewhat less a near-term concern. Finally, employment markets are unquestionably in a better state compared to even a year ago.
President Lockhart continued:
At the same time, certain headwinds that have persistently buffeted the economy and restrained growth appear to have lessened. The fiscal drag associated with federal government budget austerity measures has eased. The risk of another financial meltdown emanating from Europe seems to have receded. Concerns about European sovereign debt and the exposure of the European banking system were an important source of uncertainty that weighed heavily on business confidence in the years 2011 and 2012, for instance.
By Mike Chriszt, vice president in the public affairs department of the Atlanta Fed