The Fed Beige Book is out and they essentially admitted the economy is being manipulated. The opening paragraphs state....
Most Districts noted increases in manufacturing activity since the previous report. Particular strength was seen in industries tied to residential construction and automobiles, while several Districts reported uncertainty or weakness in defense-related sectors. Consumer spending grew modestly, and firms in some Districts cited higher gasoline prices, expiration of the payroll tax cut, and winter weather as factors restraining sales growth. Retailers in several Districts expect continued sales growth in the near term. Overall vehicle sales remained strong or increased, but sales of used automobiles declined in some Districts. Travel and tourism expanded across most reporting Districts, boosted by both business and leisure travel.
So strength in coming from housing and automobiles. The same housing market that is being helped by ultra-low mortgages rates (albeit also helped by positive cap rates), with a great number of buyers being investment-related purchases. And don't think for a second that housing investors won't walk away from their 'investment' if the economics of their purchases goes against them. This is while auto manufacturing/sales are being propelled/assisted by an expansion of credit terms beyond all established norms. Remember that WSJ article detailing auto loans terms being expanded out 6, 7, and more years? Having worked in the auto industry for a number of years in my youth, I know cars do last for much longer than 5 years. This smacks me of a duration mismatch.
Most Districts noted increases in manufacturing activity since the previous report. Particular strength was seen in industries tied to residential construction and automobiles, while several Districts reported uncertainty or weakness in defense-related sectors. Consumer spending grew modestly, and firms in some Districts cited higher gasoline prices, expiration of the payroll tax cut, and winter weather as factors restraining sales growth. Retailers in several Districts expect continued sales growth in the near term. Overall vehicle sales remained strong or increased, but sales of used automobiles declined in some Districts. Travel and tourism expanded across most reporting Districts, boosted by both business and leisure travel.
So strength in coming from housing and automobiles. The same housing market that is being helped by ultra-low mortgages rates (albeit also helped by positive cap rates), with a great number of buyers being investment-related purchases. And don't think for a second that housing investors won't walk away from their 'investment' if the economics of their purchases goes against them. This is while auto manufacturing/sales are being propelled/assisted by an expansion of credit terms beyond all established norms. Remember that WSJ article detailing auto loans terms being expanded out 6, 7, and more years? Having worked in the auto industry for a number of years in my youth, I know cars do last for much longer than 5 years. This smacks me of a duration mismatch.
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