Beige Book: Modest Growth Continues, but Outlook Remains Cloudy


Business conditions continued to improve across the nation’s 12 Federal Reserve Districts, according to the newest release of the Federal Reserve Beige Book. Unfortunately, the pace of recovery remained slow and uneven in most areas; in addition, contacts for the report noted either weaker or less certain outlooks for business conditions. Consumer spending was reportedly up slightly in most districts thanks to solid growth in tourism activity and auto sales. Back-to-school sales were also healthy across many districts. Furthermore, Boston, Chicago, Kansas City and Dallas saw some unexpected strength in the sales of big-ticket or luxury items. Hurricane Irene did hamper retail sales and tourism activity in the Richmond District and had a mild impact on the New York District during the reporting period.

Although business contacts in many districts noted ramped up spending on construction and mining equipment, overall capital spending plans have become increasingly restrained in recent months due to lingering uncertainty over economic growth. Manufacturing activity increased across all districts compared to the last report bolstered by production at auto and auto parts suppliers’ plants. The supply chain problems stemming from the Japanese earthquake/tsunami appear to have ended according to contacts. Outside of auto manufacturing, production of mining equipment expanded strongly in Dallas and Atlanta due to robust oil and gas drilling activity. High-tech equipment manufacturing was mixed, with Boston reporting a gain while Dallas and San Francisco saw output moderate.

The residential real estate market remained weak by most assessments, but some improvements were noted in the multifamily/rental market. According to the report:

All twelve Districts reported that real estate and construction activity was little changed on balance from the prior report. Residential construction remained at low levels, particularly for single-family homes. That said, Philadelphia, Cleveland, and Minneapolis noted small increases in single-family construction, and construction of multifamily dwellings continued to increase at a moderate pace in Boston, Philadelphia, Cleveland, Kansas City, Dallas, and San Francisco. Home sales remained weak overall, and home prices were reported to be either flat or declining across all of the Districts. In contrast, rental demand continued to rise in a number of Districts.


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