LPL Financial’s Kleintop Says Beige Book Economic Outlook Brighter

The Beige Book economic report, a compilation of the 12 Federal Reserve districts, indicated Wednesday that the economy continued to improve, on balance, during the reporting period from early/mid-October to mid-November. Manufacturing activity continued to expand in almost all districts, with relatively strong growth seen in metal fabrication and the automotive industries. Reports also showed steady to increasing activity for professional and nonfinancial services. Two districts noted a decline in demand from government agencies due to budgetary shortfalls.

“The report backs up the report we got from China earlier in the day about increased manufacturing, as well as the PMI report,” says Jeff Kleintop (left), Chief Market Strategist for LPL Financial. "The only two districts that really declined were St. Louis and Philidelphia, which are service centers. The real manufacturing districts, like Cleveland, did well.”

Klientop noted that although the news is good, it’s balanced by confusion over extension of Bush-era tax cuts and European sovereign debt concerns.

“Those are policy issues which we will continue to watch,” he says. “But the bottom-up fundamental issues contained in this report appears to suggest we’ve shaken off the summer soft spots in output and lending, and they should remain strong well into 2011.”

Hiring activity showed some improvement across most districts, although the report said employers are waiting for clearer signals of expanding business prospects before adding significantly to payrolls.