Beige Book Reveals Sluggish Economic Activity

District by district analysis mixed

In another sign of a possible double-dip recession, the nation's economic activity was modest in June and the beginning of July, according to the latest Federal Reserve Beige Book Report.

Economic activity has continued to increase, on balance, since the previous survey, although the Cleveland and Kansas City Districts reported that the level of economic activity generally held steady.

Among those Districts reporting improvements in economic activity, a number of them noted that the increases were modest, and two Districts, Atlanta and Chicago, said that the pace of economic activity had slowed recently.

"I think the odds of this being a double-dip recession are higher than they've been for some time," says Charlie Farrell, J.D., LL. M., a principal with North Star Investment Advisors in Denver, Colorado. "Remember the National Bureau of Economic Research, the traditional arbiter of when we go into and come out of a recession has still not declared this one over despite the growth we've seen in the past year. And the fact that we're still arguing over numbers and policy to get it moving, almost three years later, is not a good sign. Bottom line; whether it's a double dip or one long recession, the economy is pretty weak."

Specific sector and district results include:

  • ? Manufacturing activity continued to expand in most districts, although several districts reported that activity had slowed or leveled off during the reporting period.
  • ? Districts also noted improved conditions in the services sector.
  • ? The five districts reporting on transportation noted increased activity.
  • ? Tourism activity also increased across the Districts, although the Atlanta District noted concerns about decreased leisure travel to the Gulf Coast.
  • ? Retail sales reports generally indicated a continued rise in spending, and several Districts noted that necessities continued to be strong sellers, while big-ticket items moved more slowly.
  • ? However, most Districts that reported on auto sales noted declines in recent weeks.
  • ? Activity in residential real estate markets was sluggish in most Districts after the expiration of the April 30 deadline for the homebuyer tax credit.
  • ? Commercial real estate markets, especially construction, remained weak.
  • ? Banking conditions varied across the Districts, with some Districts noting soft or decreased overall loan demand; credit standards remained tight in most reporting Districts.
  • ? Recent rains had mixed effects on crop conditions, while activity in the natural resources sector increased.
  • ? Overall labor market conditions improved modestly across the Districts, with several reports of temporary hiring.
  • ? Consumer prices of goods and services held steady in most reporting Districts. Input prices also held largely steady, with only a few reports of cost increases.
  • ? Wage pressures continued to be contained on the whole.
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