Economic activity showed signs of picking up, but at a modest pace, according to the Federal Reserve Beige Book released today. The report, a conglomeration of data from the twelve Federal Reserve Districts, was for reporting period from September to early October. The numbers should do nothing to alter the currency status quo within the Fed’s Federal Open Market Committee.
Housing continued to be a drag, with most districts reporting overall home sales below year-ago levels. Kansas City, New York and Minneapolis were the only districts reporting a notable decrease in home prices. There were small morsels of good news, with the Philadelphia Fed reporting an increase in existing home sales and Richmond, Dallas and Kansas City showing an increase in the sale of higher-priced homes. Commercial real estate continued to lag as well, with one exception being the Manhattan apartment sector, which showed higher leasing activity.
Lending activity was stagnant for the most part, and demand for commercial and industrial loans remained weak due to political and economic uncertainty. Price pressures were absent as higher input costs–especially in regards to agricultural commodities and industrial metals–were not passed on to consumers. There was little evidence of wage increases across the board, and hiring was limited also due to economic uncertainties, with the Atlanta Fed noting a preference for increased work load and temporary higher rather than long-term additions to the employee base.
Retail spending and tourism activity picked up modestly in most districts. Decreased activity in the gulf due to the BP oil spill was offset by increased tourism in other locations such as Northern Florida, Georgia and Tennessee, according to the Atlanta Fed. Demand for information technology (IT) services remained strong, with businesses looking to invest in new technologies to enhance production efficiency. Healthcare consulting also picked up in response to healthcare reform. Manufacturing activity also continued to expand with all but two districts, Philadelphia and Richmond, reporting production and new order increases across a wide range of industries.
Nothing in the report comes as much of a surprise, and should do nothing to alter the Fed’s thinking in terms of the possibility of QE2. The FOMC has noted that it will take action in order to fulfill its dual mandate of low unemployment and standard rate of inflation, both if which are absent at this time. The Fed has also reiterated that growth in and of itself is not enough to satisfy its requirements, and that ‘slow’ growth warrants policy intervention.
Full text: Fed Beige Book Oct. 2010
