The Federal Reserve’s December Beige Book, which surveys national economic conditions, reports that for the October to mid-November period economic activity continued to grow, albeit at a slow pace.
The report indicates that manufacturing activity increased, with strong growth for auto and metal fabrication. Professional and non-financial services also continued to show steady growth.
With respect to housing, the December Beige Book noted that housing markets continue to remain depressed.
Residential real estate and construction activity remained at a low level in all Districts. The Philadelphia, Atlanta, St. Louis, and Minneapolis Districts reported some further weakening in home sales. Boston, New York, and Richmond characterized the market as soft; while Cleveland, Kansas City, Dallas, and San Francisco described the market as sluggish. The Chicago District reported that high inventories of unsold homes continued to be a drag on new residential construction and home prices. Residential house prices were mixed. Price declines were observed in New York, Philadelphia, Atlanta, and Kansas City; prices were flat to up in Minneapolis, and prices edged up in Boston. The Dallas District reported that home prices increased on a year-over-year basis. The rental market continued to offer incentives to tenants in New York, while strong demand for rental units was reported in Richmond and Dallas. Outlooks for 2011 were mixed.
The report finds that consumers remain very price sensitive and focused on necessity buying. Nonetheless, sales of cars and light trucks and tourism expenditures improved since October.
Taken as a whole, the report is consistent with current NAHB analysis indicating that households and businesses continue to repair balance sheets by paying down debts and rebuilding savings. Furthermore, lending to business has not expanded, and as we have noted previously, access to credit continues to remain very tight for home builders regardless of promising or poor local economic and housing market conditions.