5 Things You Need To Know About the Beige Book Report

From the Desk of Lou Brien

1. The economy is moving in the right direction, says the Beige Book; "Report from the twelve Federal Reserve Districts indicated that while economic activity remains at a low level, conditions have improved modestly further, and those improvements are broader geographically then in the last report." Ten districts said activity was up and conditions had improved, up from the eight districts that said that was so in the previous Beige Book. But the report was generally muted in its praise and some key areas have not joined in with the overall improvement.
2. Consumer spending is a good example; while the recent holiday season was slightly better than in 2008, spending is "still far below 2007 levels."
3. Home sales is another; "toward the end of 2009, home sales increased in most Districts, especially for lower-priced homes. Home prices appeared to have changed little since the last Beige Book, residential construction remained at low levels in most Districts." And manufacturing; the report says "manufacturing activity has improved since the last report in six Districts", but that marks six Districts as steady or down and although the outlook was optimistic for manufacturers, spending plans remain cautious.
4. Other sectors were difficult to compliment: "Nonresidential real estate conditions remained soft in nearly all Districts...Vacancy rates were rising and rents were declining in most Districts. Several Districts reported that landlords were focused on tenant retention and the slack demand was allowing tenants to negotiate lease extensions at low rents with favorable allowances."; "Loan demand continued to decline or remained weak in most Districts."; "Labor market conditions remained soft in most Federal Reserve Districts".
5. Wage and Price pressures remained subdued in nearly all Districts says the Book. But there is a bit of a dichotomy here; on the one hand raw material prices, especially metals were reported to have shown an increase, but pricing power was limited for retailers.