The Federal Reserve Board’s Beige Book, an informal survey of economic conditions in the 12 Federal Banking Districts, generally showed continued economic growth in July, albeit at a slower pace—reflecting many other recent signs of a slowing of the recovery. However, slower growth is still growth, and there are no clear signs of another recession.
The July Beige Book was weaker than recent Beige Book in at least one respect: two Districts, Atlanta and Chicago, reported a slowdown in the pace of economic activity. The other Districts reported that economic activity increased slightly or held steady. The problem areas remain the usual suspects: soft loan demand and tight credit; real estate; and lack of wage pressure.
Credit
Overall loan demand was reported as soft or weak in Cleveland, Atlanta, and Dallas, while total outstanding loan volume decreased in recent months in St. Louis but was steady in Philadelphia and San Francisco. Demand for commercial loans was flat to increasing in the Philadelphia, Cleveland, Richmond, Chicago, and Kansas City Districts; in contrast, St. Louis reported a decrease in commercial loans outstanding, while New York, Atlanta, and San Francisco reported restrained or decreasing demand in this lending category. Demand for consumer loans was weak in Cleveland and eased in Philadelphia; Atlanta and St. Louis indicated a decline in consumer lending; but demand for consumer loans increased in New York and Kansas City. Demand for residential mortgage loans eased in the Philadelphia District but increased in the New York District; Cleveland reported residential mortgage activity below expectations at given rates; and real estate lending decreased in St. Louis. Credit was limited for commercial real estate loans in Chicago, and demand fell for these loans in New York and Kansas City.
Real Estate
Nearly all Districts reported sluggish housing markets in the months since the homebuyer tax credit expired on April 30. Commercial and industrial real estate markets continued to struggle in all twelve Districts. Overall, vacancy rates were flat to slightly increased and continued to exert downward pressure on rents. Developers reported difficult credit conditions in the Cleveland, Richmond, St. Louis, and Kansas City Districts, while the Dallas District reported a few developers going out of business. The outlook for commercial and industrial real estate across the Districts ranged from further declines in activity to slow growth.
Wages
Wage pressures remained largely contained across most Districts. Boston, Philadelphia, Richmond, Minneapolis, and San Francisco reported little or no change in wages, while Cleveland, Chicago, and Kansas City reported that wage pressures were small or remained subdued. Dallas reported that wage pressures were mostly nonexistent, with the exception of the airline industry. While that may sound good for employers, the problem is that there is little wage pressure because there are too few jobs and too many people looking for work.
Please click the following link to view the full July 2010 Beige Book report: The Beige Book.
Gregg D. Killoren
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