Beige Book: Economic Growth Continues at Varied Pa
Washington, DC, October 12, 2006--The economy appeared fragmented into pockets of strength and weakness, but, in general, economic activity continues to expand, according to the latest Federal Reserve 'Beige Book' survey of current economic conditions released on Thursday.
Four of the twelve Fed districts reported that growth had firmed in late September and early October, while two districts -- Philadelphia and Dallas -- reporting activity had "cooled."
Other districts reported growth as "moderate or mixed."
It seemed hard to find many national trends in the latest report. For every district that reported strong conditions, other districts reported weakness in the same sector.
Most districts reported stronger consumer spending, although auto and home-related sales were sluggish across much of the country.
Service-sector activity expanded in most districts, but there were pockets of weakness reported in Boston, Cleveland and Dallas.
Factory conditions "generally held up well," the Fed said, although activity edged down in Philadelphia.
The Beige Book is a collection of anecdotal evidence compiled by the 12 Fed regional banks. It is designed to give policymakers a better sense of economic activity in the weeks before they meet to set monetary policy. The next FOMC meeting is Oct. 24 and 25.
It is not as important as the "Green Book" which contains the Fed staff's forecast of the U.S. economy and the "Blue Book" which presents analysis of the monetary policy alternatives at the meeting.
This report was compiled by the Richmond Fed bank and was based on information collected before Oct. 2.
Considering the mixed nature of the report, "the Fed is likely to do nothing" at upcoming meetings, said Kevin Logan, chief U.S. economist at Dresner Kleinwort.
"In general the report supports the idea that the Fed is on hold for now and shows little evidence that a significant downturn in growth is on the near horizon," said Drew Matus, senior financial markets economist at Lehman Brothers.
The report found "widespread cooling in the residential real estate market, with the majority of Fed districts reporting "lower asking prices, rising inventories of homes on the market and softening sales."
There did not seem to be much spillover from the weak housing sector, although San Francisco reported layoffs for mortgage brokers and real estate agents.
But in general, labor market conditions appear to remain tight, the Fed survey said, with some districts noting shortages of skilled workers.
Continuing the mixed reports, a number of districts noted rising wage pressures, but others said it was in check.
Overall, most districts reported "few signs of increased price pressure in recent weeks." Lower energy prices were a factor in many districts. There were only scattered reports that businesses were able to pass higher costs to consumers.
Commercial construction gained strength in most of the country, the report said.
