Reports from the Federal Reserve Districts suggest that economic activity remained generally weak in late April and May. Three Districts described economic activity as softer, weaker, or lower, with an additional four Districts reporting slower, sluggish, or modest economic growth. The remaining five Districts of Philadelphia, Cleveland, Atlanta, St. Louis, and San Francisco described activity as stable or little changed in recent weeks.Consumer spending slowed since the last report as incomes were pinched by rising energy and food prices. Higher energy prices also appeared to damp domestic tourism. Reports on nonfinancial services varied across Districts and industries. Manufacturing activity was generally soft in recent weeks, with weak demand for housing-related and some other products but with increasing demand for exports. Residential real estate markets remained weak across most Districts. Commercial real estate conditions varied across Districts, as did reports on nonresidential construction activity. Lending activity also varied across Districts and market segments, though tighter credit standards were reported for most loan categories. Districts reporting on the agriculture and energy sectors noted improved crop conditions and increased drilling and extraction activity.
Reports of higher input costs were widespread. Manufacturing contacts in several Districts noted some ability to pass along higher costs to customers. Retailers reported mixed results with respect to raising final goods prices. In most Districts, wage pressures were reported as moderate or limited for all but a few skilled-labor positions, as hiring activity remained spotty in most Districts.
In the Philadelphia (Third District) region, Business conditions showed signs of stabilizing during May, overall, as some sectors strengthened slightly and others weakened. Manufacturers, on balance, reported nearly steady rates of new orders and shipments in May, after decreases in April. Retailers continued to post lackluster sales results, with many stores experiencing year-over-year decreases. Sales of motor vehicles continued to fall. Bank lending has been increasing slowly. Residential real estate sales and construction activity remained well below the pace of a year ago, although there has been a slight seasonal increase in home sales. Commercial real estate leasing and construction activity has diminished in the past few months. Reports of increases in input costs and output prices were about as common in May as they were in April. Employers in the District continued to describe wage increases as moderate.
The outlook among Third District businesses varies. Manufacturers' forecasts have become more positive since the last Beige Book. On balance, they expect increases in shipments and orders during the next six months. Retailers generally do not foresee a significant increase in the sales pace during the summer. Auto dealers expect sales to weaken further. Bankers anticipate slow expansion in overall lending. Residential real estate agents and home builders expect sales to continue to be slow during the next several months despite the recent slight upturn. Contacts in commercial real estate expect leasing and construction activity to remain soft until financial conditions improve.
Source Beige Book
Click here for the Federal Reserve June 2008 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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