Beige Book: Outlook Bleak, Signs of Bottom


The Federal Reserve says economic conditions remain weak but added that some areas were showing signs of stabilizing

The Federal Reserve's latest update on regional economic conditions across the U.S. indicated that overall economic activity remained weak, but some sectors indicated that the pace of decline was slowing or stabilizing at a low level.

The Fed's "Beige Book," released Apr. 15, indicated that manufacturing activity had weakened across a broad range of industries and that nonfinancial-service industries also contracted. Retail sales were also slow, but in a few areas sales were seen as picking up. Real estate also remained weak, with sales activity largely driven by low prices on distressed homes. Travel and tourism also continued to suffer, as businesses and leisure travelers cut back their spending.

"Reports from the Federal Reserve Banks indicate that overall economic activity contracted further or remained weak," the report said. "However, 5 of the 12 Districts noted a moderation in the pace of decline, and several saw signs that activity in some sectors was stabilizing at a low level." There was also a widespread tightening of credit standards. Data for the survey were collected in March and early April.

The report also noted "downward pressure" on prices as well as an easing of upward wage pressures. "Many contacts continued to report job cuts and wage and hiring freezes. Employment continued to decline across a range of industries, with only scattered reports of hiring," the report said. It cited a New York City employment agency that reported an "inexhaustible" supply of available workers. In a separate report, the Labor Dept. reported that consumer prices dipped unexpectedly in March, falling by 0.1%.

Glimmers of Hope

The latest Beige Book supports suggestions that the recession was beginning—in a few limited areas—to moderate, as President Barack Obama suggested on Apr. 14 when he noted that the economy, while still troubled, was showing some glimmers of hope. Agricultural conditions were generally described as "favorable."

While the employment outlook generally was described as "bleak," there were isolated bright spots, including some local hiring of health-care workers. In the Chicago and Dallas districts, there was also an uptick in the hiring of finance workers due to an increase in mortgage refinancings.

Among other positive signs, the Fed said that orders and sales of high-tech gear "firmed somewhat at very weak levels in the Dallas and San Francisco Districts. Defense firms in the Boston and Cleveland Districts reported solid activity. Food manufacturers saw sales gains in the Philadelphia and San Francisco Districts, and a food manufacturer in the St. Louis District noted plans to open a new plant."

Meanwhile, the Fed said, "pharmaceutical firms in the Boston and Chicago Districts continued to see solid demand" and "petrochemical producers in the Dallas District noted a slight turnaround in operating rates."

Mintz is news editor for BusinessWeek.com in New York.

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