Highlights
The Federal Reserve's Beige book prepared for the June 25 FOMC meeting reported a "weak" economy but with price pressures seen in food and energy sectors. Slowing was particularly notable for the consumer sector. Housing was still weak with sales and home prices still declining in most Fed Districts. But a few Districts did report improvement in home sales. Outside of the construction industry, input prices increased and some manufacturers reported being able to pass along some of the price increases. The bottom line is that Fed Districts are still reporting an overall flat economy with rising prices for inputs boosting inflation pressures. But those pressures have not yet impacted wage inflation.

The picture for economic growth is quite soft. Housing is still negative, the consumer sector has slowed, and non-residential construction has eased. But the biggest new concern for growth is from the consumer sector.

"Consumer spending slowed since the last report as incomes were pinched by rising energy and food prices. Higher energy prices also appeared to damp domestic tourism." "Reports on overall sales of automobiles and light trucks were weak, with several Districts indicating that sales of trucks and SUVs declined. Although dealers generally struggled to move vehicles off of their lots, contacts in the Richmond, Atlanta, and Chicago Districts reported solid sales of hybrid and other fuel-efficient vehicles."

The Beige Book noted that manufacturing activity was "generally soft since the last report." "Reports of softer demand for housing-related products continued to be widespread." "Reports on food processing were mixed with some Districts indicating that higher prices had constrained demand, while others noted rising demand." But a lower dollar has helped manufacturing. "Industries demonstrating increased activity were boosted, in part, by a strong overseas market."

A new theme is that consumer credit is deteriorating somewhat. "Reports on lending activity varied across Districts, although reports of softening in the consumer segment persisted." "The New York, Philadelphia, and Cleveland Districts reported increases in overall delinquencies, with respondents in New York indicating a notable rise in late payments for consumer loans. Credit quality deteriorated further in San Francisco, but began to stabilize in Chicago and Dallas. Contacts in Kansas City and Dallas expected loan quality to deteriorate going forward. All Districts reporting on credit standards noted further tightening for consumer, residential, and commercial loans."

Inflation is showing up more at the input level for manufacturers while retailers have been a little more restrained in passing along higher prices except for food and energy.

"Business contacts in most Districts reported increases in input prices since the last report, especially prices for energy, petroleum derivatives, metals, plastics, chemicals, and food. Manufacturing contacts in several Districts reported some ability to pass along the higher costs to customers and contacts in the Cleveland District noted that they are considering additional price increases in the near future if input costs continue to rise."

Recent slowing in labor markets have moderated wage growth somewhat. "Business contacts in most Districts reported moderate or limited wage growth in response to some loosening of labor market conditions."

The bottom line is that the Beige Book is mostly in line with recent comments by Fed officials. Reports are generally in line with recent expectations for the economy. The one area getting more attention, however, is consumer credit. We may see changes in the economic outlook if that sector weakens further.

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