Highlights
The Federal Reserve's Beige book prepared for the August 5 FOMC meeting reported that "the pace of economic activity slowed somewhat since the last report" but there are increased signs of rising inflation. Slower growth was due to a sluggish consumer sector, declining manufacturing, falling housing, and slowing commercial real estate activity. Exports were found to still be healthy while services activity was mixed. While growth was seen as softening, that was not the case for inflation as the Beige Book stated, "All reporting Districts characterized overall price pressures as elevated or increasing." However, wage pressures were "generally limited."

According to the latest reports from Fed District banks, the consumer is retrenching although income tax rebate checks were seen as helping sales. Consumer spending was reported as mixed, weak, or slowing in nearly all Districts. Automobile sales were almost uniformly weak across Districts and were especially poor for large vehicles such as trucks, SUVs, and some minivans. Sales were reported as picking up at discount stores while discretionary sales and housing-related sales were weak. Notably, the outlook for consumer spending was "generally downbeat."

Manufacturing "declined or remained weak" in most Districts. Notably, housing-related production was down while energy-related production was up. The outlook for capital equipment was mixed. "While most Districts expected stable capital spending heading forward, a few noted manufacturers' plans to reevaluate based on current economic conditions."

Residential real estate markets declined or were still weak across most of the country. Previously a source of strength, commercial real estate activity weakened or remained sluggish in a majority of Districts.

Loan growth was generally reported to be restrained across the country, with residential real estate lending and consumer lending showing more weakness than commercial lending. Most Districts reported a further tightening of credit standards, especially for residential real estate and construction loans. Among the Districts that commented on bank loan quality, some deterioration was reported, including increased delinquencies on consumer and residential real estate loans.

All reporting Districts characterized overall price pressures as elevated or increasing. Input prices continued to rise, particularly for fuel, other petroleum-based materials, metals, food, and chemicals. Many firms indicated that they plan to try to pass along higher costs but most indicated that they are having a hard time raising prices due to soft demand. Currently, outside of food and energy, retail prices are seen as stable with some prices down due to discounting.

Most Districts reported labor markets as unchanged or slightly weaker compared with the last Beige Book. However, demand remains strong for skilled workers in most industries.

The bottom line is that the economy is mixed but moving slowly forward. In contrast, inflation pressures are rising although weak demand has restrained retail prices somewhat. The Fed's dilemma remains the same - does the Fed stand pat on low interest rates to boost growth or is it time to raise rates to preclude inflation. The next FOMC announcement on August 5 will likely address that issue.

2008 Release Schedule

Released On: 1/16 3/5 4/16 6/11 7/23 9/3 10/15 12/3 Released For: Dec Feb Mar May Jun Aug Sep Nov