Fed’s Beige Book Continues to Report Slow Economic Growth


The Federal Reserve’s October Beige Book, which surveys national economic conditions, reports that for the September to early October period economic activity continued to grow, albeit at a slow pace.  The report is similiar in tone to the September release.

The report provides additional support for the expectation that the Federal Reserve will undertake a second round of government bond purchases, so-called Quantitative Easing II, to hold down interest rates and provide additional monetary policy stimulus.

With respect to housing, the October Beige Book stated:

Housing markets remained weak. Most District Beige Book reports suggested overall home sales were sluggish or declining and were below year-ago levels. There were scattered reports of some improvement in sales in a few Districts, however. Philadelphia noted an increase in sales of existing homes, and Richmond, Kansas City, and Dallas reported upticks in sales of higher-priced homes. Sales reports were mixed in the St. Louis and Minneapolis Districts, with increases in some metro areas and declines in others. Home inventories were elevated or rising according to most District reports. Home prices were generally stable since the last report, although Kansas City noted a decrease in prices, and New York and Minneapolis reported declines in some metros. Homebuilders in the Atlanta District reported downward price pressure and expressed concern about rising foreclosures and bank-owned properties coming to market.

Single-family construction activity was at very low levels, but had improved somewhat in the Chicago, St. Louis, and Kansas City Districts. Atlanta reported a softening of construction activity overall, and Minneapolis said single-family building activity was mixed across metros. Builders in the Dallas District said they had pulled back on starts considerably after the run-up earlier in the year.

Respondents’ outlooks suggested sales and construction would remain subdued through year-end. There were some reports that tighter credit standards for buyers and small builders, along with general economic uncertainty, were stalling activity.

The analysis in this report is consistent with other NAHB forecasting and analysis, including the recent slight improvement in the HMI index from 13 to 16, the first improvement in 5 months.

Financing challenges for homebuyers and home builders remain obstacles to a more robust recovery for housing.

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