July's Beige Book Shows Slowdown in Growth

Fed's beige Book covering the period spanning mid-June through late-July reported that 'economic activity has continued to increase, on balance, since the previous survey' but economies in 2 (Cleveland and Kansas City) of the Fed's 12 districts 'held steady' while 2 (Atlanta and Chicago) showed slowdown in the pace of expansion. The overall outlook is less optimistic than June's report as the Fed described the economy in all 12 districts as 'continued to improve' at 'modest' pace.

Manufacturing activities grew in most districts although some reported that 'activity had slowed or leveled off'. This was compared with June's Beige Book which showed that the sector 'continued to gradually improve across all 12 districts'. Improvement was seen in services industries and tourism also picked up during the reporting period.

Retail sales during the earlier summer months were 'generally positive' while the increases were 'modest'. The report indicated continued increases in spending, despite the fact that much of this came from necessities and not big-ticket items.

Concerning the property market, '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 12 districts. Overall, vacancy rates were flat to slightly increased and continued to exert downward pressure on rents. Construction activity remained weak in most districts.

Labor market conditions 'improved gradually' in several districts. Some reported increased demand for temporary workers while some saw more hiring in the manufacturing sector. However, Dallas reported that firms in the energy industry experienced significant regional layoffs as a result of 'the deepwater drilling moratorium' while San Francisco noted 'continued high levels of unemployment and limited hiring'. Job market conditions appeared to have softened from the previous reporting period when 'employment levels edge[d] up in most districts'.