Poor reviews for the latest Beige Book

Over to the other side of the pond and the pessimistic tone of the latest Fed Beige Book, published on July 28, echoes the weakness evident in U.S. economic activity data. Though economic activity improved on balance, districts reporting improvement indicated that the increases were “modest,” two districts reported no increase in activity and two others reported slowing activity. Retail sales were generally positive, though gains were modest in most districts. Sales of necessities were stronger, while “big ticket items moved more slowly.” Manufacturing activity continued expanding, though several districts reported slowing or flattening, while services sector conditions improved. Residential real estate activity was “sluggish in most districts” after the homebuyer tax credit expiration, and commercial construction remained weak. Some districts reported “soft or decreased” loan demand. Labour market conditions improved modestly, and on a positive note, there were “several reports of temporary hiring.”

The staggered road to recovery has been blamed for high unemployment and low consumer confidence. The latest figures will do nothing to reduce fears that US economy is slowing as opposed to recovering. The latest headache for the Fed comes from the West coast as Governor Arnold Schwarzenegger announced yesterday a state of emergency over the state’s finances. This raises pressure on lawmakers to negotiate a state budget that is more than month overdue and will need to meet a $19 billion shortfall.

Report by Philip Ryan