Fed Sees Recession Easing in Some Markets

The severity of the recession is beginning to ease in some regions of the country, but a return to growth won’t come until at least next year, according to the Federal Reserve Board’s periodic survey of business conditions, known as the Beige Book.

“Reports from the twelve Federal Reserve district banks indicate that economic conditions remained weak or deteriorated further during the period from mid-April through May. However, five of the districts noted that the downward trend is showing signs of moderating. Further, contacts from several districts said that their expectations have improved, though they do not see a substantial increase in economic activity through the end of the year,” said the report’s summary, released June 10.

Manufacturing activity declined or remained at a low level across most of the Fed’s districts, but several districts also reported that the outlook of manufacturers has improved somewhat. Boston, Philadelphia, Cleveland, Chicago, St. Louis, and Minneapolis reported declines in manufacturing activity, while production remained at very low levels in the San Francisco District. Atlanta and Kansas City indicated that the pace of the decline in manufacturing had moderated or slowed. New York characterized the sector as having stabilized, while Dallas mentioned signs of stabilization. In contrast, Richmond reported a rise in both new orders and shipments. Philadelphia reported that the primary metals, machinery and electrical equipment industries remain especially weak.

A number of districts reported an uptick in home sales, and many said that new home construction appeared to have stabilized at very low levels. Agents in the New York, Philadelphia, Cleveland, Richmond, Chicago, Kansas City, Dallas and San Francisco districts reported an uptick in home sales. The reasons cited include seasonal factors, low interest rates, declining house prices and tax credits for first-time buyers. Much of the sales increase was found in the lower-priced end of the market.

Vacancy rates for commercial properties were rising in many parts of the country, while developers are finding financing for new commercial projects increasingly difficult to obtain. Commercial vacancy rates were rising in the Boston, New York, Philadelphia, Richmond, Atlanta, Chicago, Minneapolis, Kansas City and San Francisco districts, putting downward pressure on rents. Atlanta, Chicago and St. Louis reported new construction projects being postponed or cancelled and new construction in the New York, Philadelphia and Minneapolis districts dropped substantially.