Beige Book Sees Signs of Slowdown

Although economic activity showed continued growth, the Federal Reserve's 12 districts recounted "widespread signs of deceleration," according to the latest beige book released Wednesday.

The report, which is based on information collected on or before Aug. 20, showed moderate growth across most districts expect for those of New York, Philadelphia, Richmond, Atlanta and Chicago, which noted some slowdown in overall economic activity.

As expected, the expiration of the homebuyer tax credit continued to drag on home sales, which also negatively impacted construction activity. Meanwhile, the still-sluggish commercial real estate sector began to show some signs of stabilization.

The labor market continued to be an area of concern as districts reported more qualified job-seekers than positions.

"Hiring of permanent employees was held down in part by employers' reliance on temporary and contract workers, as reported by Philadelphia and Atlanta, although Boston noted that conversions from temporary to permanent staff picked up," the report said.

On the positive side, agricultural and natural resource companies reported stronger demand. Financial institutions also relayed some positive improvements, noting a slight improvement in credit quality.

On balance, consumer spending also grew although purchases were largely for necessities and low-priced items. Travel and tourism activity, however, increased across districts.

Manufacturing activity, while mixed across districts, showed mild growth overall and was the strongest for makers of metals, semiconductors and other high-tech products. High-tech manufacturers also said they have been working at near maximum capacity after scaling back in recent years.

Efforts to reduce debt continued to limit demand for consumer loans although New York, Cleveland, Chicago and Kansas City noted an uptick in mortgage refinancing activity.

The report will be used by the Federal Open Market Committee at its next policy-setting meeting on Sept. 21.

-- Written by Melinda Peer in New York.

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