Fed Sees Pace of Economic Contraction Decline
Several Federal Reserve Bank districts saw signs of economic stabilization as the pace of deterioration began to ease in five of the 12 -- or more than 40% of all -- districts, the Fed said Thursday in the Beige Book, a regular publication released eight times annually. Reports from the various districts also traced some stabilization in the housing markets with "better-than-expected" sales in some areas offsetting the falling home prices and construction reported widely. "Housing markets remained depressed overall, but there were some signs that conditions may be stabilizing," the Fed said. "Many districts said factors such as homebuyer tax credits, low mortgage rates, and more affordable prices led to a rising number of potential buyers." The Richmond, Atlanta, Minneapolis, Kansas City, and San Francisco districts reported modest pickups in sales, with Atlanta and Kansas City even experiencing a downturn in unsold inventory. New home construction, however, continued to fall as unsold inventories remained elevated in most areas. Although home purchases remained weak overall, "low mortgage rates were fueling refinancing activity, according to the report. "Outlooks for the housing sector were generally more optimistic than in earlier surveys, with respondents hopeful that increased buyer interest would lead to better sales," the Fed said. "In particular, the New York, Richmond, and Kansas City districts noted an increase in residential real estate loans. Additionally, residential refinancing activity remained brisk, although the loan process was taking longer due to more stringent appraisals and underwriting standards." Many districts saw continued deterioration in loan quality and increased delinquencies in all loan categories. Commercial real estate "weakened further" as districts continued to report job cuts and wage and hiring freezes, with only scattered reports of hiring. "Wage and salary pressures eased as labor markets weakened in all districts," the Fed said. Consumer spending remained weak overall, although several districts reported either slightly higher sales or slightly moderated sales declines compared with the previous report. New car sales remained "feeble" overall, with auto dealers continuing to struggle with the sluggish demand. Write to Diana Golobay at firstname.lastname@example.org.