Federal Reserve Beige Book Report June 2009 Report

Reports from the twelve Federal Reserve District Banks indicate that economic conditions remained weak or deteriorated further during the period from mid-April through May. However, five of the Districts noted that the downward trend is showing signs of moderating. Further, contacts from several Districts said that their expectations have improved, though they do not see a substantial increase in economic activity through the end of the year.

Manufacturing activity declined or remained at a low level across most Districts. However, several Districts also reported that the outlook by manufacturers has improved somewhat. Demand for nonfinancial services contracted across Districts reporting on this segment. Retail spending remained soft as consumers focused on purchasing less expensive necessities and shied away from buying luxury goods. New car purchases remained depressed, with several Districts indicating that tight credit conditions were hampering auto sales. Travel and tourism activity also declined. A number of Districts reported an uptick in home sales, and many said that new home construction appeared to have stabilized at very low levels. Vacancy rates for commercial properties were rising in many parts of the country, while developers are finding financing for new commercial projects increasingly difficult to obtain. Most Districts reported that overall lending activity was stable or weak, but with mixed results across loan categories. Credit conditions remained stringent or tightened further. Energy activity continued to weaken across most Districts, and demand for natural resources remained depressed. Planting and growing conditions varied across Districts as did agricultural input costs.

Labor market conditions continued to be weak across the country, with wages generally remaining flat or falling. Two Districts also mentioned employers' plans to scale back employee benefit programs. The Atlanta, Chicago, and St. Louis Districts reported that some state and local governments faced hiring freezes or outright job cuts. While manufacturing employment levels remained low, some Districts saw signs that job losses may be moderating. With few exceptions, Districts reported that prices at all stages of production were generally flat or falling. The notable exception to the downward pressure on prices was the widely-reported increase in oil prices.

In the Philadelphia (Third District) region, economic activity continued at a slow rate in May. Manufacturers, on balance, reported declines in shipments and new orders. Retailers gave mixed reports, noting gains in sales during the month at discount stores but weakening sales at stores selling higher-priced merchandise. Motor vehicle dealers indicated that sales remained sluggish. Bank loan volume has been level in recent weeks, and credit quality has continued to deteriorate. Residential real estate sales showed a slight seasonal gain in May but remained below the level of a year ago. Nonresidential real estate investment and construction activity continued to be slow. Service-sector activity has been generally slow in recent weeks. Business firms in the region reported level or falling input costs and output prices in May.

The outlook in the Third District improved slightly in May. Although contacts do not foresee substantial increases in activity in the near term, more now believe the decline in economic activity might be near a bottom. Manufacturers forecast a rise in shipments and orders during the next six months. Retailers expect sales to gain strength slowly, but auto dealers expect sales to remain slow for the rest of the year. Bankers anticipate little growth in lending. Residential real estate agents and home builders believe market conditions might be stabilizing, but they do not expect sales to move up solidly until next year. Contacts in nonresidential real estate expect leasing and purchase activity to remain weak during the balance of the year but perhaps move up somewhat during the fourth quarter. Service-sector firms expect activity to be slow during the next few months, at least.

Source Beige Book

Click here for the Federal Reserve June 2009 Beige Book [Beige Book Archives]


See related blog articles:
Federal Reserve Beige Book For Economic Conditions (What is the "Beige Book"?)
The Federal Reserve - Making Sense In Plain English

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