Fed’s Beige Book Says Economic Activity Has Continued To Stabilize

Economic activity continued to stabilize in July and August, according to the Federal Reserve’s Beige Book report, a compilation of anecdotal evidence on economic conditions from each of the 12 Federal Reserve districts.

The report released Wednesday afternoon noted that Dallas indicated that economic activity had firmed since the last report, while Boston, Cleveland, Philadelphia, Richmond, and San Francisco also mentioned signs of improvement.

Additionally, Atlanta, Chicago, Kansas City, Minneapolis, and New York generally described economic activity as stable or showing signs of stabilization, and St. Louis remarked that the pace of decline appeared to be moderating.

The Fed added that most districts indicated that the outlook for economic activity among their business contacts remained cautiously positive.

Nonetheless, the report said that consumer spending remained soft in most regions, with a majority of the Fed districts reporting that retail activity was flat.

While Boston, Philadelphia, and Kansas City noted some improvement in sales, the increase was primarily attributed to back-to-school purchases.

Most districts said that the cash-for-clunkers program helped to boost traffic and sales, although Cleveland and Kansas City said that the program had an adverse effect on used car sales.

At the same time, most regions reported some improvement in the residential real estate markets, with Chicago, Richmond, Boston, and San Francisco observing an uptick in sales over the last six weeks. However, sales largely remained below the year-ago levels.

With regard to the commercial real estate markets, the reports indicated that demand for space remained weak and construction continued to decline.

The report also said that most districts reported that loan demand was weak and that credit standards remained tight.

Meanwhile, most districts noted improvements in manufacturing production, with Philadelphia, Richmond, Atlanta, Cleveland, and Chicago all reporting moderate increases in new orders.

The Fed added, “The near-term outlook among manufacturers varied, but the majority of reports indicated that manufacturers were cautiously optimistic.”

While the report also showed that labor market conditions remained weak, staffing firms in Atlanta, Dallas, Richmond, Cleveland, Philadelphia, Boston, New York, and Chicago did report a slight pickup in the demand for temporary workers.

The Federal Reserve will use the information in the Beige Book report when it makes its next decision on interest rates following a two-day meeting ending September 23rd. The Fed is widely expected to leave its target range for the federal funds rate at 0.0 to 0.25 percent.