–Manufacturing Feels Overseas Weakness; But Outlook More Positive
By Yali N’Diaye
WASHINGTON (MNI) – Overall economic activity “continued to expand
gradually in July and early August,” the Federal Reserve’s latest survey
of conditions around the country said Wednesday.
The Fed’s so-called ‘Beige Book’ said that six districts reported
that their economies continued to expand “at a modest pace” and three
districts cited “moderate growth.”
On the price and hiring fronts, the Beige Book cited little change,
noting that “overall prices for finished goods were relatively stable
despite somewhat increased input prices.”
In the labor market, “most districts reported that employment was
holding steady or growing only slightly,” the Beige Book said. In fact,
several districts even noted “a softening in employment relative to
expectations.”
As a result, “upward wage pressure was reported to be very
contained across districts.
The survey findings were summarized by the Boston Fed based on
information collected through August 20 and will be reviewed by the
Fed’s policymaking Federal Open Market Committee when it meets in
Washington September 12-13.
Among sectors, the picture was “mixed” in manufacturing, which felt
the weakness overseas.
“Many districts reported some softening” in the manufacturing
industry, although the outlook was “somewhat more positive,” the report
said.
Many districts cited “either a slowdown in the rate of growth or a
decline in the level of sales, output, or orders,” it added. “Among
those with declining shipments and orders, Philadelphia noted that the
rate of decline was tempering.”
Reports from the manufacturing sector showed the impact from
developments abroad, not only in Europe but also in Asia.
“Weakness overseas remains a problem for U.S. manufacturing,” the
Beige Book said. “Reports from the Boston, Atlanta, and Chicago
Districts explicitly mentioned it,” it continued.
It added that “Although Europe represented one notable problem,
several Districts also mentioned weakness in demand in Asia as an
issue.”
Against this backdrop, “there was little movement” on the
employment front in the manufacturing sector, where selling prices were
“largely stable.”
“In general, District reports indicate that the cost and
availability of raw materials has not been an issue for manufacturers
recently, especially as compared with the situation in previous years,”
the report said.
Elsewhere, the picture was more positive, starting with retail
activity, which increased since the last report, including auto sales,
although selling prices were also “largely stable.”
Activity in nonfinancial services also “generally picked up,”
despite mixed results across districts and sectors.
In the real estate sector, activity was “generally said to be
improving.”
On the residential side, the Beige Book said all 12 districts
reported increases in home sales, prices, or construction.
On the commercial side, real estate markets were also “generally
positive.”
Developments in banking and financial services also showed
improvement, including in credit conditions.
The Beige Book cited lower credit spreads and increased competition
among lenders for “high-quality borrowers.”
Still, the picture was not uniform. “The direction and magnitude of
changes in loan demand varied among the Districts and also with respect
to type of loan,” the report said.
In other sectors, agricultural conditions were also mixed as a
result of the severe drought. On the other hand, oil and gas activity
“continued to be robust.”
In energy and mining, districts reported that activity was
“generally high and increasing,” the report said.
** MNI Washington Bureau: 202-371-2121 **
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