Fed Beige Book Report Depicts Fragile Recovery

Washington, DC, Sept. 10, 2009--The recession is ending and a slow, fragile recovery is taking hold, according to the Federal Reserve's latest Beige Book report.

The business survey found economic activity stabilizing or improving in most regions.

All but one of the Fed's 12 regions indicated economic activity either was "stable," showed "signs of stabilization" or had "firmed," according to the Fed's survey. The one exception was the St. Louis region, which reported the economic decline is "moderating."

Businesses in most Fed regions said they were "cautiously positive" about the economic road ahead.

Analysts predict the economy is growing in the current quarter at an annual rate of 3 percent to 4 percent. That's mostly because businesses, which had slashed investments during the recession, are spending more.

Auto sales have been lifted by the government's recently ended Cash for Clunkers program. Manufacturing and the battered housing market, which led the country into recession when it collapsed, have also shown signs of improvement.

The problem for the economy is that the expected growth this quarter comes mainly from the auto companies and other manufacturers, which are refilling their depleted stockpiles.

Consumer spending remained soft in most places.

Still, the assessments of businesses on the front lines of the economy were brighter than those they provided for the last edition of the Fed survey in late July.

In Wednesday's survey, the Dallas region indicated that economic activity had "firmed." The Fed regions of Boston, Cleveland, Philadelphia, Richmond and San Francisco mentioned "signs of improvement." The Atlanta, Chicago, Kansas City, Minneapolis and New York regions described activity as "stable or showing signs of stabilization."

In most regions, manufacturers reported "modest" improvements.

The market for homes is still weak -- though it flashed some signs of improvement. In most places, buyer demand was stronger for cheaper homes.

Fed regions credited a tax incentive for first-time home buyers with increasing sales. Home prices kept falling in most parts of the country, though in the Dallas and New York regions, the survey found prices "firming."

There was plenty of bad news in the survey. In the commercial real estate market, demand stayed weak, and construction fell in all parts of the country. And the job market was still sickly all over the nation.