More Fed districts report slowdown: Beige Book

Weakness concentrated in East, Mid-Atlantic

WASHINGTON (MarketWatch) — The U.S. grew at a “modest to moderate” pace over the last month and a half as more districts are reporting slowing growth, according to the latest survey of anecdotes on the economy released by the Federal Reserve on Wednesday.

The so-called Beige Book, which covered the economy between June and early July, was less enthusiastic than the “moderate” assessment of the last Beige Book. And now three regions, up from one, reported slowing growth.

The slowdown appeared to be concentrated in the East Coast and Mid-Atlantic regions, as the New York, Philadelphia and Cleveland districts saw slowing growth.

The Richmond district reported “mixed activity.”
This Beige Book survey was prepared by the Federal Reserve Bank of Atlanta and is based on information collected before July 9.
The report, basically a collection of anecdotal information from Fed business contacts, is meant to give Fed officials a feel for economic conditions as they prepare for their next interest-rate policy meeting on July 31- Aug. 1.
Fed officials will have much more in-depth reports on economic conditions in hand before they meet. But these more detailed materials are not public.
The downgrade of economic conditions fits with the pessimistic report presented over the last two days by Fed Chairman Ben Bernanke on Capitol Hill as part of his twice-a-year testimony.
While not committing to any action, Bernanke said the Fed would act if it decided that the labor market was “stuck in the mud.”

Factory production was said to be expanding slowly, and there were also widespread reports of a deceleration in new orders.
Retail sales were up slightly in all districts, led by auto sales, except Boston and Cleveland.
Wage pressure, a key ingredient of inflation, remained modest. Hiring was seen as “tepid.”
With high heat and drought cited as the cause, the Chicago and Kansas City districts reported concerns for their corn and soybean crops, and by late June, corn prices were sharply higher.
Many districts noted strength in auto sales, led by a demand for fuel-efficient vehicles.
Not surprisingly given the recent bankruptcy of Patriot Coal, regions where coal production is prevalent noted that extraction had decreased over the last year with electricity generation shifting to natural gas. Many contacts said natural gas prices will remain low in the near future.