Beige Book: Segmented Recovery Inches Ahead. Housing Market Depressed
The Federal Reserve has released the Beige Book
The Beige Book is a compilation of anecdotal information and data on current economic conditions across the country. The findings are NOT THE VIEWS OF FEDERAL RESERVE OFFICIALS...instead, each Federal Reserve bank interviews key business contacts, economists, market experts, and other sources in their specific district. This report is published eight times a year.
DJ Newswire Quick Recap...
DJN-DJ FED BEIGE BOOK: US ECONOMIC GROWTH CONTINUES TO IMPROVE
DJN-DJ FED BEIGE BOOK: MANUFACTURING ACTIVITY EXPANDS IN MOST DISTRICTS
DJN-DJ FED BEIGE BOOK: RETAIL, TOURISM SPENDING BROADLY IMPROVES
DJN-DJ FED BEIGE BOOK: HOUSEHOLDS REMAIN PRICE SENSITIVE IN SEVERAL DISTRICTS
DJN-DJ FED BEIGE BOOK: HOLIDAY SHOPPING EXPECTATIONS GENERALLY POSITIVE
DJN-DJ FED BEIGE BOOK: HOUSING MARKETS REMAIN DEPRESSED
DJN-DJ FED BEIGE BOOK: PRICES FOR GOODS STABLE DESPITE RISING INPUT COSTS
DJN-DJ FED BEIGE BOOK: HIRING ACTIVITY IMPROVES ACROSS MOST DISTRICTS
DJN-DJ FED BEIGE BOOK: WAGE PRESSURE SUBDUED ACROSS MOST DISTRICTS
DJN-DJ Fed Beige Book: US Economic Growth Continues To Improve
Excerpts From The Release...
Real Estate and Construction
Residential real estate and construction activity remained at a low level in all Districts. Some districts reported further weakening in home sales. Others characterized the market as soft or sluggish. The Chicago District reported that high inventories of unsold homes continued to be a drag on new residential construction and home prices. Residential house prices were mixed. Price declines were observed in New York, Philadelphia, Atlanta, and Kansas City; prices were flat to up in Minneapolis, and prices edged up in Boston. The Dallas District reported that home prices increased on a year-over-year basis. The rental market continued to offer incentives to tenants in New York, while strong demand for rental units was reported in Richmond and Dallas. Outlooks for 2011 were mixed.
Conditions in the commercial real estate industry were mixed during the reporting period. Several Districts reported flat demand and high vacancy rates, which translated into limited nonresidential construction activity. The New York, Atlanta, and Kansas City Districts noted some weakening in nonresidential activity, while the Boston and Dallas Districts indicated some modest improvement in commercial real estate. Reports from Cleveland and Chicago noted that most new projects fell generally into the infrastructure category. Contacts in Boston, Richmond, Kansas City, and Dallas expressed some optimism about the near-term outlook in their Districts, but contacts in several other Districts expressed a more cautious outlook.
Banking and Finance
Banking conditions remained stable across most Districts. Lending activity was reported as steady or unchanged in New York, Philadelphia, St. Louis, Kansas City, Dallas, and San Francisco, while a slight improvement was noted in Cleveland, Richmond and Chicago. The Atlanta District reported constrained credit conditions and weak loan demand. Contacts in Chicago and Dallas said that increased competition for high-quality borrowers resulted in more aggressive loan pricing.
Demand for commercial and industrial loans was generally stable, though several Districts noted improvements in specific loan categories. The Cleveland and Chicago Districts reported increased lending for mergers and acquisitions, and access to credit by small businesses in Atlanta improved slightly.
Consumer lending has remained stable at weak levels in most Districts. The San Francisco District reported that loan demand declined slightly as a result of households' desire to deleverage, while Chicago saw a small pickup in consumer lending. Several Districts reported increases in lending related to residential real estate, and, in particular, to refinancing activity. Reports on changes in credit standards were mixed. Bankers in New York reported a tightening in credit standards across all loan categories, Kansas City contacts indicated no change in lending standards, and Atlanta reported an easing in standards for small firms. Contacts in the Cleveland, Richmond, and Chicago Districts reported improved credit quality, but San Francisco bankers noted ongoing struggles with credit quality. The Cleveland and Richmond Districts both reported declines in delinquencies.
Labor and Prices
Hiring activity showed some improvement across most Districts, although employers are waiting for clearer signals of expanding business prospects before adding significantly to payrolls. A preference for part-time and temporary workers was reported in the Atlanta and Chicago Districts. Seasonal hiring in retail trade is expected to be higher this year in Chicago and San Francisco than in the previous two years.
Employers in the Boston, Richmond, and Minneapolis Districts reported having difficulty finding skilled workers. Employment agencies in the New York, Richmond, and Chicago Districts reported a moderate increase in new job openings, while staffing firms in Dallas said that hiring activity is strong. Boston staffing contacts noted that labor demand has strengthened, particularly in the information technology, medical, manufacturing, and legal sectors. Wage pressures remain subdued across Districts. Contacts in Richmond and Kansas City noted that they expect little change in wage pressures during the upcoming months. However, employers in San Francisco reported significant increases in employee benefit costs.
Prices of final goods and services were fairly stable across Districts despite rising input costs, especially for agricultural commodities, metals, and fuel. Companies in the Atlanta, Chicago, Kansas City, and San Francisco Districts reported a limited ability to pass through higher input costs to customers given the relative softness in demand. However, some manufacturers in the Boston, Cleveland, and Atlanta Districts have announced plans to raise their product prices in the near future. Retailers in Philadelphia and San Francisco noted price increases on selected products imported from Asian countries. Reports from the Chicago and Dallas Districts indicated that that record-high inventories and forecasts for a warmer-than-normal winter are putting downward pressure on natural gas prices.
Consumer Spending and Tourism
Retail spending showed improvement across most Districts, with the exception of Boston, Cleveland, Richmond and St. Louis, where results were mixed. A return to more seasonably cool weather was credited for boosting sales in the New York and Dallas Districts. Grocers reported rising sales in Cleveland and Richmond, while sales dropped off in San Francisco. Purchases of apparel improved in the Philadelphia, Chicago, and Dallas Districts. Expectations for the holiday shopping season were positive across Districts; however, in Richmond, retailers expected holiday shopping to be restrained. Reports from the Philadelphia, Cleveland, Atlanta, and Chicago Districts indicated that consumers remained value conscious and tended to focus on buying necessities. Purchases of big ticket items were soft in Richmond, St. Louis, and Kansas City.
Manufacturing
Manufacturing activity continued to expand in most Districts. New York was the only District where manufacturing activity was reported to have weakened, while Dallas reported that manufacturing was mixed. Metal fabrication increased in Chicago, Kansas City, Dallas, and San Francisco. Contacts in automotive industries reported gains in Boston, Cleveland, Richmond, Atlanta, and Chicago. The Boston, Kansas City, and San Francisco Districts reported increased sales for high-technology manufacturers, though Dallas noted that growth in orders and production in high-technology industries had slowed from earlier in the year. Steel producers and service centers in the Cleveland District reported that volume was either flat or improving, while Chicago noted some temporary softening in steel demand. Refiners in the Dallas and San Francisco Districts noted reduced production levels. The Philadelphia and Dallas Districts indicated little improvement in demand for manufacturers with ties to residential housing and construction. The Philadelphia, Cleveland, and Kansas City Districts reported that capital spending or spending plans had increased. On net, manufacturers in the St. Louis District reported they planned to expand operations. Contacts in Boston, New York, and Richmond commented on increasing input costs. Several Districts noted an optimistic outlook from manufacturers. Boston and Richmond described manufacturers as upbeat; New York and Chicago reported contacts as more optimistic; and Philadelphia and Minneapolis manufacturers expect increases in activity in the near term. However, several contacts in Dallas expressed concern about a decline in demand from government agencies, as budget shortfalls continue.
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A depressed housing market, burgeoning retail and tourism statistics, consumer price sensitivity, and rising producer price pressures are among the things noted in the Fed's latest beige book, released today. Two Plain and Simple's come to mind after reading the Beige Book...
From Fed Sees Lagging Labor Market Recovery. Cuts Inflation Forecast. Is More QE Coming?
Plain and Simple: the Fed's GDP outlook indicates we should be expecting an uptick in economic activity in the year ahead. This data is a precursor to that prediction. The problem is retailers and product sellers don't have much pricing power (must sell at discounts) nor do they have stable demand. With unemployment stubbornly high, the rising cost of inputs can't be passed along to the consumer level nd firms will be forced to trim other expenses (temporary hiring) or accept thinner profit margins.
From ADP: Services Sector Adds 79,000 Jobs. Goods Producers Finally Expand Hiring
Plain and Simple: Good Stuff! Private industry added 93,000 jobs in November and October was revised better by 39,000. Inside the data, service providing industries expanded hiring for the 10th consecutive month while goods producing firms expanded hiring for the first time since....March 2007. If this doesn't scream "WE'RE REPLACING HUMAN BRAWN WITH TECHNOLOGY" then I don't know what does. Welcome to the age of efficiency and high productivity where American (Korean) made robots battle Chinese children for global manufacturing supremacy! American innovation is leaving the untrained (non-specialized) blue collar worker behind. 6.2 million Americans have been unemployed for 27 weeks or longer.....
And a brief update on the market...
After this morning's heavy losses, MBS have rallied almost all day, finally perching on a ledge between 100-15 and 100-23 in the FN 4.0. All eyes are STILL on NFP tomorrow as nothing has really happened today.
And finally, just because it struck me as "cool," MG presents the Fed Voter Quote of the day!
From Bullard: "QUANTITATIVE EASING HAS NO IMPACT ON LONGER-RUN U.S. FISCAL OUTLOOK, WHICH REMAINS POOR REGARDLESS OF FED ACTIONS"
You tell 'em Jimmy! Sorry to hear that you'll lose your voting rights in January.