WASHINGTON (MNI) – The following is the first part of the text of
the summary of the Federal Reserve’s Beige Book survey published
Wednesday:

Summary

Economic activity has continued to increase, on balance, since the
previous survey, although the Cleveland and Kansas City Districts
reported that the level of economic activity generally held steady.
Among those Districts reporting improvements in economic activity, a
number of them noted that the increases were modest, and two Districts,
Atlanta and Chicago, said that the pace of economic activity had slowed
recently.

Manufacturing activity continued to expand in most Districts,
although several Districts reported that activity had slowed or leveled
off during the reporting period. Districts also noted improved
conditions in the services sector. The five Districts reporting on
transportation noted increased activity. Tourism activity also increased
across the Districts, although the Atlanta District noted concerns about
decreased leisure travel to the Gulf Coast. Retail sales reports
generally indicated a continued rise in spending, and several Districts
noted that necessities continued to be strong sellers, while big-ticket
items moved more slowly. However, most Districts that reported on auto
sales noted declines in recent weeks. Activity in residential real
estate markets was sluggish in most Districts after the expiration of
the April 30 deadline for the homebuyer tax credit. Commercial real
estate markets, especially construction, remained weak. Banking
conditions varied across the Districts, with some Districts noting soft
or decreased overall loan demand; credit standards remained tight in
most reporting Districts. Recent rains had mixed effects on crop
conditions, while activity in the natural resources sector increased.
Overall labor market conditions improved modestly across the Districts,
with several reports of temporary hiring. Consumer prices of goods and
services held steady in most reporting Districts. Input prices also held
largely steady, with only a few reports of cost increases. Wage
pressures continued to be contained on the whole.

Manufacturing and Other Business Activity

Manufacturing activity in most Districts continued to move up since
the last report, although the pace of activity slowed or activity
leveled off in the New York, Cleveland, Kansas City, Chicago, Atlanta,
and Richmond Districts. Automobile manufacturing was a bright spot for
the Cleveland, Chicago, and St. Louis Districts. Automobile parts
suppliers also experienced increased demand in both the Richmond and
Chicago Districts. Fuel demand at refineries in the San Francisco
District improved, while gasoline demand was steady in the Dallas
District. Firms in the semiconductor manufacturing industry reported
relatively strong sales or demand growth in both the Boston and San
Francisco Districts. Firms in aircraft and parts manufacturing saw sales
pick up in both the San Francisco and Dallas Districts. Manufacturing
firms in the Boston, Philadelphia, Kansas City, and Dallas Districts
were optimistic that demand would continue to improve in the following
months. However, Cleveland’s contacts expect demand growth to taper off,
Philadelphia noted that the balance of positive over negative views had
narrowed, and Atlanta reported fewer firms planning expansions in
production. Richmond, Chicago, and Dallas reported that firms in
construction-related manufacturing experienced weak demand; construction
supplies sales were flat in Kansas City, and Minneapolis reported that a
firm in the sector was increasing production. Steel production declined
in both the Chicago and Cleveland Districts. Some manufacturers in the
Atlanta and San Francisco Districts reported high excess production
capacity. Capacity utilization was below pre-recession levels in
Cleveland and edged lower among steel producers in Chicago.

Activity in the services sector improved across most Districts
since the previous report. The freight transportation industry
experienced gains in the Cleveland, Atlanta, Kansas City, Dallas, and
Philadelphia Districts. Boston, Minneapolis, and Dallas reported a
pickup in demand for some consulting firms. Tourism activity increased
in the San Francisco, New York, Minneapolis, Richmond, Kansas City, and
Atlanta Districts. Atlanta reported that leisure travel decreased in the
Gulf Coast, but some of the lost tourist traffic was offset by the
presence of cleanup crews, oil company workers, and the National Guard.
Information technology firms saw increased business in the Philadelphia,
Chicago, and St. Louis Districts, while activity was flat in the
Minneapolis District. Demand for healthcare services was flat in both
the San Francisco and Richmond Districts, while activity increased in
the Boston District.

Consumer Spending

Reports on retail sales during the early summer months were
generally positive, although in most Districts the increases were
modest. Retail sales in the New York, Philadelphia, Minneapolis, and
Kansas City Districts were higher than year-earlier sales, and Dallas
reported solid gains. But sales in the Boston District were mixed
compared with the previous year. Recent sales increased slightly in the
Cleveland, Atlanta, Chicago, and San Francisco Districts; sales in the
Richmond District weakened; and sales in the Kansas City District were
flat compared with the previous report. Several Districts cited apparel,
food, and other necessities as recent strong sellers, while big-ticket
items were weak sellers. Contacts reported satisfactory inventory levels
in the New York District, mixed inventory levels in the Boston District,
and low or declining inventory levels in the Richmond, Atlanta, and
Chicago Districts. The outlook for sales was mixed: Retailers in the
Philadelphia, Cleveland, Kansas City, and Dallas Districts reported that
they expect modest positive sales growth in the upcoming months;
contacts in the Cleveland, Atlanta, and Chicago Districts reported a
less optimistic outlook going forward than in the previous report; and
retailers in the Boston District reported a cautious outlook.

The Districts that reported on auto sales during the early summer
months generally noted a decrease in recent sales. Since the previous
report, auto sales in the New York, Philadelphia, Cleveland, Richmond,
Chicago, and San Francisco Districts declined, while auto sales in the
Kansas City District increased and were unchanged in the Dallas
District. Compared with last year, auto sales in the Atlanta and St.
Louis Districts were higher. New York, Philadelphia, Cleveland, Chicago,
Kansas City, and Dallas all reported that inventory levels were low or
declining. Auto dealers anticipate little change in sales for the rest
of 2010 in the Philadelphia District and expect sales to increase slowly
in the Dallas District. Contacts in the Kansas City District expect
continued strong demand, while those in the Cleveland District do not
anticipate strong growth in the coming months.

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** Market News International Washington Bureau: 202-371-2121 **

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