Economic conditions are improving, although modestly, the Federal Reserve said in its Beige Book report on the economy. The report, a collection of comments received from businesses and other sources in 12 federal regions, also showed improvement in auto sales.
Eight districts indicated some pickup in activity or improvement in conditions, while the remaining four – Philadelphia, Cleveland, Richmond, and Atlanta – reported that conditions were little changed and/or mixed.
Consumer spending was reported to have picked up moderately since the last report, for both general merchandise and vehicles, with a number of districts noting relatively robust sales of used autos.
“Auto sales generally improved since the Fed’s last report, in some cases rebounding from the brief dip after the Cash for Clunkers program,” the report said. “Sales increases were reported in New York, Philadelphia, Richmond, Chicago, St. Louis and Dallas, while sales were described as flat or mixed in the Cleveland, Minneapolis, Kansas City, and San Francisco districts.”
Most districts indicated that non-auto retailers were holding lean inventories going into the holiday season, although some indicate that retailers have recently become more optimistic about the holiday-season outlook. Auto dealers’ inventories, largely depleted during the Cash for Clunkers program, have been or are being rebuilt, according to the report.
Financial institutions generally reported steady to weak loan demand, continued tight credit standards, and steady or deteriorating loan quality.
“Loan demand was said to have weakened in New York, Philadelphia, Cleveland, St. Louis, Kansas City, and Dallas districts,” noted the report, which said the weakness appeared to have been concentrated in the commercial sector. “Credit quality showed signs of deteriorating in the New York, Philadelphia, Dallas, and San Francisco districts, but was described as stable or mixed in Cleveland, Chicago, and Kansas City, with Chicago reporting some improvement outside of commercial real estate.
“Increasingly tight credit standards were reported in New York, Richmond, Chicago, St. Louis, Dallas, and San Francisco – largely on commercial loans,” added the report.
Labor market conditions remained weak since the Fed’s last report, although there were signs of stabilization and scattered signs of improvement. “Despite generally weak conditions, some signs of improvement were noted,” read the report. “For example, contacts in Boston reported that they were beginning to hire and reverse pay cuts or freezes that were implemented earlier in the year, and contacts in the St, Louis district reported that the service sector had started to expand recently.”