FED BEIGE BOOK: SLOWER, SOFTER, WEAKER, SLUGGISH
The FED’s Beige Book for late April and May highlighted widespread slowdowns due to higher gas and food prices and continued implosion in the housing sector.
The Beige Book variously characterized regional economies as slower, softer, weaker, sluggish and nearly steady on the downside; the upside was characterized by 2 usages of “stable” and “unchanged.”
Consumer Spending was reported to slow since the last Beige Book due to rising food and energy prices in the Philadelphia, Richmond, Atlanta, St. Louis, Minneapolis, Dallas and San Francisco. Retail Inventory levels were reported higher in some districts, stable in few districts, and an issue of concern in 3 districts. Overall Auto and Truck sales were weaker except for Hybrid and other fuel-efficient vehicles.
St. Louis and Kansas City reported some demand in Services, notably air travel, but all other Districts reported weakness in Services.
Manufacturing was generally soft since the last report. 5 districts reported weaker activity, 3 noted no change and 4 Districts saw a slight increase. Demand was focused on steel, energy, farm equipment and Dallas saw strong demand for Transportation equipment. Unsurprisingly, 5 Districts reported strong activity in the Energy Sector. Dallas reported the strongest drilling level in 20 years.
Real Estate was seen as generally weak though there were “a few reports of some recent pickup in home sales due to increased affordability” — the report did not specify where said pick up occurred. Commercial Real Estate activity has softened in 5 Districts, increased in 1 and the remaining reported “mixed” activity in the Commercial Sector.
Construction activity was influenced by credit availability for residential and non-residential projects. Banks report fewer consumer loans, weak residential lending, C&I mostly unchanged or declining and all Districts reported tighter credit for Consumer, Residential and Commercial loans. Many Districts reported increased delinquencies and deteriorating credit quality.
Prices were reported higher. Input prices were reported generally higher, though manufacturers did report some success in passing through higher prices. Retailer reported mixed results in raising final goods prices. Most Districts reported moderate or limited wage growth.
Overall, the U.S. Economy is weaker, sluggish, softer….with no real evidence of steadying, let alone an upturn.