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Economic Activity and Auto Sales Improving, Says Fed’s Beige Book

April 20, 2010

Fueled by more favorable pricing and credit terms, eight of the 12 federal districts in the Federal Reserve’s Beige Book reported improved vehicle sales in March.

The Beige Book, which is published eight times a year, gathers anecdotal information from 12 districts across the country on current economic conditions. This month’s edition showed that economic activity across all Federal Reserve districts, except St. Louis, picked up slightly last month.

Districts generally reported increases in vehicle and overall retail sales. Other economic indicators, such as tourism spending, manufacturing activity, hosing market activity, also showed slight gains. Exceptions were in the services and commercial real estate sectors. Activity in the banking and finance sector also remained mixed in a number of districts, as loan volumes and credit quality decreased.

Labor markets, another key indicator of economic activity, remained weak, although some hiring was evident – particularly for temporary staff.

Some districts indicated that consumer spending increased during the reporting period. New York and Cleveland saw sales strengthened, while sales rebounded in Richmond, Va., and Kansas City, Kan. Slight sales gains were reported in Philadelphia, while sales in San Francisco continued to improve.

Several districts described consumers as somewhat more confident, as businesses remain cautiously optimistic about future sales. Cleveland, Atlanta, Kansas City and Dallas noted that retailers expect sales to improve during the upcoming months.

Noting a pick up in auto sales were New York, Philadelphia, Atlanta, Chicago, St. Louis, Minneapolis, Dallas and San Francisco. Cleveland described sales as decent, while sales were steady in Kansas City and mixed in Richmond. Several districts noted that favorable pricing and credit terms is what helped lure buyers into showrooms, with dealers in Philadelphia indicating that they expect sales to increase during the next few months.

Manufacturing activity also increased since the Beige Book’s previous report on March 3, with all districts except St. Louis reporting increases in orders, shipments or production. Cleveland, Richmond, Atlanta and Chicago also reported increased auto or auto component productions — another sign of the auto industry finding its stride.

Bank lending activity was mixed by category in most districts. Atlanta, St. Louis and Kansas City saw weaker loan demand across all categories, while activity in San Francisco was flat at low levels. Dallas said that demand appears to be stabilizing, while New York said demand for consumer credit decreased. Demand, however, increased slightly in Philadelphia.

In Cleveland, most banks reported weak consumer loan demand, although a few of the Fed’s contacts saw a slight increase due to seasonal factors.

Credit standards remained generally unchanged across the nation, while credit quality was mixed. New York, Cleveland and Kansas City reported tighter lending standards for commercial mortgages. Fed contacts in Atlanta reported difficulty in getting credit. Dallas and San Francisco said standards continued to be tight.

New York saw increased delinquency rates for all categories except consumer loans, which were flat. Philadelphia and Richmond saw little change in credit quality, while Cleveland was mixed.

Dallas reported that credit quality was either stabilizing or improving. Chicago noted an improvement in consumer business loan quality, although credit quality for small firms continued to decline.

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