The Federal Reserve's latest snapshot of the U.S. economy showed that conditions continued to stabilize in July and August, giving further credence to economists' beliefs that the nation's deepest recession since the Great Depression may finally be easing.
In issuing its latest "Beige Book" report, the Fed said Wednesday that its regional banks in Dallas, Boston, Cleveland, Philadelphia, Richmond and San Francisco saw economic activity improving while officials in Atlanta, Chicago, Kansas City, Minneapolis and New York described the situation as stable or headed in that direction. St. Louis remarked that the pace of decline appeared to be moderating.
Of import to homeowners, the Fed said most regions reported improvement in residential real estate markets. Downward pressure on home prices continued in most areas, the Fed said, although Dallas and New York noted that local prices were firming. Reports on commercial real estate suggest that the demand for space remained weak and that nonresidential construction-related activity continued to decline, the Fed said.
The Obama administration's popular "Cash For Clunkers" program was credited with boosting new-car sales in a majority of districts, while Richmond, Atlanta, Chicago and Minneapolis saw increases in production among automobile-related industries. Cleveland and Kansas City also remarked that used car sales were adversely affected by the program, and industry contacts in the Richmond, Atlanta, Minneapolis and San Francisco questioned the sustainability of improved vehicle sales now that the program has ended.
Most districts reported improvements in manufacturing production, the Fed said. For instance, Philadelphia, Richmond, Atlanta, Cleveland, and Chicago experienced moderate increases in new orders. San Francisco indicated a rise in production of semiconductors and other IT products, but saw orders decline at fabricators and petroleum refineries.
Labor markets remained weak across the board, the Fed said, noting, however, that staffing firms in seven districts in the South and East reported a slight pickup in the demand for temporary workers. Wage pressures remained low across the country, the Fed said. Several regions noted businesses and local governments imposed wage freezes or even reduced employee compensation in some instances. Boston noted that several manufacturers had cut wage rates and do not expect to restore pay levels until next year.
Consumers spending remained soft and most districts reported flat retail sales. Boston, Philadelphia, and Kansas City noted improvement in sales, but attributed the increase mainly to back-to-school purchases. Philadelphia, Chicago, Cleveland and San Francisco observed that shoppers remained focused on essentials and continued to refrain from purchasing discretionary and big-ticket items. Five regions said that retailers continued to manage inventories carefully to keep them in line with slow sales.
Tourism activity variety, the Fed said. Kansas City, Minneapolis, and Richmond observed solid visitor numbers at local vacation destinations, whereas Atlanta and New York noted sluggish activity and aggressive hotel discounting. The San Francisco bank reported tourism in California and Nevada was weak, but visitors to Hawaii had increased.
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