Highlights
The Beige Book prepared by regional Fed banks for the upcoming August 7 FOMC meeting largely indicated that the U.S. economy continues to grow at moderate pace - above the flat first quarter. Relative strengths and weaknesses are much as in recent months. The consumer sector included spending rising at a "modest" pace although a number of Districts reported sales were "mixed or below expectations." Motor vehicle sales have been flat. Various Districts reported that higher gasoline and higher food prices have hurt spending. Sales related to housing - such as furniture and home repair materials - were declining or weak.

Capital spending continues to increase at a healthy pace while housing continued to decline. House inventories were mixed but generally still high. Household lending declined in most regions while commercial and industrial lending expanded at a "moderate pace." Office vacancy rates fell in a number of regions.

Employment increased in most regions. A number of Districts reported either tightening or tight labor markets. Hiring plans for the second half look healthy.

On the inflation front, not surprisingly, businesses reported higher input prices - notably for petroleum related inputs. Wage gains were "moderate and/or similar to the previous reporting period."

Manufacturing continued to expand during June and early July. Manufacturers are increasingly optimistic. The sectors consistently mentioned as facing strong demand included fabricated metals, defense-related products, aerospace, rubber, and processed food. Strong export demand has increased activity. However, manufacturers of housing-related products (lumber, stone, glass, cement, appliances, and furniture) typically reported declines.

In terms of problems in the financial sector, the Fed report noted some marginal changes.

"Household lending declined in most regions, while commercial and industrial lending expanded at a modest pace. New York, Richmond, Chicago, Kansas City, and San Francisco noted decreasing demand for mortgages, which in many cases was coupled with tighter underwriting standards. Cleveland indicated that consumer lending was flat to declining. In contrast, Philadelphia and Dallas reported that consumer lending was flat, and St. Louis said loans to individuals rose."

"Household credit quality deteriorated marginally, while business credit quality remained mostly favorable. New York, Richmond, Chicago, and San Francisco observed higher delinquencies on mortgages and other consumer loans. Richmond reported an increase in commercial loan delinquencies, while Philadelphia said late payments on commercial real estate loans remained low, and Chicago indicated that business credit quality was unchanged. Cleveland and Dallas reported no change in overall credit quality."

Overall, the Beige Book reports the economy much as the Fed had been anticipating in it latest report to Congress and very similar to the minutes of the last FOMC meeting. Economic growth is expected to remain at a moderate pace but inflation concerns remain due to tight labor markets and higher energy costs. The Fed will certainly continue to monitor the impact of subprime losses elsewhere in the economy. Overall, the Fed remains in wait and see mode with interest rates on hold.

2007 Release Schedule

Released On: 1/17 3/7 4/25 6/13 7/25 9/5 10/17 11/28 Released For: Dec Feb Mar May Jun Aug Sep Oct