One nice note from the revision was the rebound in after-tax corporate profits, which rose by 0.6% for Q1 after a dizzying 8.4% drop in the fourth quarter of 2015.

Will the Real GDP Please Stand Up?

Normally, one would greet the report based on anecdotal commentary -- that is, the Beige Book -- with more skepticism than an official measurement of the economy that is based on rigorous standards, processes and controls.

But there has been genuine debate about whether the US Bureau of Economic Analysis is accurately capturing economic activity in its measurements — a possibility that bureau itself has raised last year in a blog post.

The BEA has been working to improve its measurement of the economy. To give one example: next month the Census Bureau will begin providing faster access to its data on wholesale and retail trade inventories, which will allow BEA to incorporate three months of this information into its initial estimates of quarterly GDP.

Which introduces another critique about the official GDP measurement: it is backward looking and based on static data. To rectify that, two years ago, the Federal Reserve Bank of Atlanta, created a “real-time” GDP metric -- a so-called "nowcasting" model for GDP growth called GDP Now. It aggregates 13 subcomponents that make up GDP with the chain-weighting methodology used by the BEA. The forecasts have won praise in many quarters for its accuracy and is a favored forecasting tool by many investment houses.

US GDP for June 1 is 2.5%

The Atlanta Fed doesn't update update GDP Now every day, but it is close enough.

The last update was June 1, 2016 when the Fed determined US GDP to be 2.5%, down from 2.9% on May 31. Its next update will be June 3, 2016. The Fed wrote:

After this morning's construction spending release from the U.S. Census Bureau and this morning's Manufacturing ISM Report On Business from the Institute for Supply Management, the forecast for real residential investment growth decreased from 7.9% to 4.2%, the forecast for real nonresidential structures investment growth decreased from -2.8% to -6.5%, and the forecast for real government spending growth decreased from 1.2% to 0.4%.

The Beige Book In Better Perspective

Okay, now we can tackle the Beige Book report and its outlook for the economy and commercial real estate.

The report finds that commercial real estate and construction activity has expanded since the last report, “and the overall outlook among contacts in these industries remained positive,” it says.

Namely:

Commercial real estate activity increased in most Districts that reported. Absorption of space increased in Atlanta and Kansas City, while Dallas reported healthy demand for office space. A decline in vacancy rates and a rise in rents were noted in Chicago and Minneapolis. Contacts in San Francisco said demand for commercial real estate expanded further, particularly in urban areas with robust technology and healthcare industries. Commercial construction activity increased in Philadelphia, Richmond, and Minneapolis. Strong project pipelines were reported in Cleveland, and some contractors in Atlanta noted one- to two-year backlogs. An uptick in industrial construction was cited in St. Louis, while activity was varied across markets in Boston.

The Beige Book also contains the usual mix of on-the-ground observations in the various markets. To cite two examples:

• In Boston, the office leasing environment remains strong, yielding further declines in vacancy rates, although tenants appear reluctant to commit to new leases on the most expensive spaces. As for apartment construction, it remains very active in Boston. However, contacts say lending for apartment construction is slowing among the region's smaller banks as they seek to stay within their own pre-set limits on that sector's loan allocation.

• In New York City, rental markets have been mixed, with particular weakness at the high end of the market. In Manhattan and Queens, markets have softened further with rents slipping slightly below year-earlier levels. However, rental markets in northern New Jersey and Brooklyn (again, except at the high end) have remained resilient, characterized, respectively, by sturdy demand and tight inventories.

It is also worth reviewing what the Beige Book has to say about other sectors, such as retail. In the Mid-Atlantic, for example, there is some discontent about consumer spending.

Retail sales were flat since the previous report, and big-ticket sales declined. An executive at a West Virginia department store complained of online competition and the economic "domino effect" of coal mine closures, but then said that his business was good on balance. A source at a large pharmacy reported faster sales growth. A building supply retailer and an executive with a chain of convenience stores both said sales were unchanged in recent weeks. However, a big-box building supply retailer and a plumbing supply chain reported slower big-ticket sales. Sales of specialty auto parts also declined, according to another executive. Automobile and light truck sales remained fairly strong but have started to slow, according to dealers and an industry expert, while motorcycle sales were sluggish. Retail prices rose slightly faster, although increases were moderate overall.

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