The U.S. economy continues to grow at a very slow pace according to the Federal Reserve’s Beige Book. That isn’t good enough considering how deep the current recession is. At this rate, growth back to anything resembling an expansion would take a very long time. However, the good news is that the economy isn’t getting any worse for the time being.
The Beige Book is a summary of the current state of the U.S economy across all of the Fed’s districts and for the most part, all reports are of "modest" or even "slight" growth.
Inflation Not Happening
It seems that the highest "street cred" a Fed banker can have is to be an inflation hawk. Since 2008, however, inflation hawks have actually been Chicken Little’s. With the economy growing very slowly and many Americans still out of work, it’s hard to see where inflationary pressure could come from.
The just released Consumer Price Index (CPI) just confirmed that there is no real inflation anywhere to be found in the economy. The index rose just 0.1 percent. Prices excluding food and energy, both traditionally volatile pricing sectors that seem to move of their own accord rather than in step with other prices, actually rose at the slowest rate in six-months, suggesting that retailers have little to no upward pricing power in the months leading up to the holiday season.
In other words, the economy has to get moving again before anyone is going to have luck raising prices and that isn’t going to happen before Christmas. Look for a value priced holiday shopping season, but big discounts might be hard to come by as retailers won’t be reducing prices from higher profitability, growing prices, but rather from low profitability, stable prices.