Economy's Resilient, Fed Says

The beige book says housing is suffering, but elsewhere conditions don't appear troubling.
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Economic activity in the U.S. continued to expand in the past few weeks even in the face of the difficulties in the credit markets, but the housing arena saw its situation worsen.

Those observations were found Wednesday in the

Federal Reserve's

"beige book," a report that uses anecdotal evidence to discuss conditions in the central bank's 12 regions.

"The weakness in the housing market deepened across most districts, with sales weak or declining and prices reported to be falling or flat," the beige book said. "Most districts reported a continuing contraction in the residential mortgage market."

Developments in the financial markets have led to tighter lending standards for home loans, "which was having a noticeable effect on housing activity, and several

regions noted that the reduction in credit availability added to uncertainty about when the housing market might turn around."

Several Fed banks said commercial real estate was seeing somewhat more constraining credit conditions, but credit availability and quality remained good for most borrowers. Activity in the commercial sector was generally stable to expanding.

"Outside of real estate, reports that the turmoil in financial markets had affected economic activity during the survey period were limited," the beige book said.

St. Louis and Kansas City described the pace of growth as moderate. Similarly, Cleveland, Chicago and Minneapolis said their economies increased at a modest rate. Boston and Atlanta said the situation was mixed, and New York spoke of an ongoing expansion.

The regional economies overseen by Philadelphia, Richmond, Dallas and San Francisco Fed banks were still advancing, but the pace slowed down.

Retail sales were generally positive. Still, many districts said auto and furniture sales were sluggish. Manufacturing activity improved across most districts, and demand for business loans held steady or weakened. Consumer lending was mixed.

Nearly every regional bank reported at least modest increases in employment, and wage gains were characterized as moderate or steady. Most areas viewed overall price pressures as little changed.

Modest to moderate increases in consumer spending were widespread, and the service industry was generally seen as neutral to positive.

The latest beige book was prepared at the Cleveland Fed and was based on information collected before Aug. 27. The beige book provides a summary of comments made by business and other contacts outside the Fed, and it isn't meant to reflect the views of central bank officials.