Fed's Beige Book Unveiled Deceleration In US Growth

The Fed's Beige Book shows that US' economic growth moderated further during the period from mid-July to end-August. While the recovery continued to expand, it has shown 'widespread signs of a deceleration'. Of the 12 districts, 5 saw growth at 'a moderate pace', 5 pointed to 'positive developments or net improvements compared with the previous reporting period' and the rest showed 'mixed conditions or deceleration in overall economic activity'.

Consumer spending and tourism showed slight increase with most districts reported rise in non-automotive retail sales compared with previous reporting period and the same period last year. Most Districts also reported that sales of new automobiles and light trucks were largely stable or up slightly. Contacts were optimistic for stable sales or slight growth over the balance of the year. This is a positive sign as sales soared despite the absence of tax incentives.

The pace of growth in manufacturing activities slowed. While most districts reported gained in production activity and sales, 4 (New York, Richmond, Atlanta, and Chicago) noted that the overall pace of growth slowed, while 3 (Philadelphia, Cleveland, and Kansas City) reported that demand softened compared with the previous reporting period. In July, the Fed stated that manufacturing activities grew in most districts although some reported that 'activity had slowed or leveled off', while in June, the sector 'continued to gradually improve across all 12 districts'.

As evidenced from recent housing data, activities in residential real estate market 'declined further' with most districts reporting 'very low or declining home sales' following the expiration of government tax credits. Yet, some reported 'heightened appraisal activity for refinancing purposes' while several districts (New York, Cleveland, Chicago, and Kansas City) saw 'a recent flurry of refinancing activity spurred increased demand for residential mortgages.

Employment situation remained weak and 'hiring of permanent employees was held down by employers' reliance on temporary and contract workers'. Nonetheless, some districts (Boston, Chicago, and Kansas City Districts) showed higher conversions of temporary working contracts to permanent ones. Wage pressure remained limited and the Fed described it as 'modest' in general.

The Beige Book basically echoed what the Fed Chairman Ben Bernanke said at Jackson Hole last month. Growth in the US continues, albeit at a relatively modest pace.