By Yali N’Diaye

WASHINGTON (MNI) – The Federal Reserve Wednesday reported that its
latest survey of economic conditions around the country — the “Beige
Book” — showed that economic activity continued to grow between
mid-July and the end of August despite “widespread signs of a
deceleration.”

In fact, five Districts reported “mixed conditions or a
deceleration in overall economic activity,” as New York, Philadelphia
and Richmond joined Atlanta and Chicago, which had already reported a
slowdown between early June and July 19.

And even when not decelerating, “Economic growth at a modest pace
was the most common characterization of overall conditions,” the Beige
Book said.

Against this backdrop, both wage and price pressures remained
“limited,” although mismatches between available skills and job
requirements have led some Districts to report increased wage pressure
“in a narrow set of sectors.”

In the retail sector, cautious consumers continued to concentrate
their purchases on necessities or lower-priced goods, the survey says.

As a result, auto and light truck sales were “largely stable or up
slightly.” Looking ahead, however, “contacts were optimistic for stable
sales or slight growth over the balance of the year.”

With households focused on essential goods and on reducing their
debt burden, “Consumer lending remained sluggish in general,” banks
reported.

Households’ caution was reflected in a further slowdown in home
sales that in turn prompted a slowdown in construction.

“Most District reports highlighted evidence of very low or
declining home sales, which many attributed to a sustained lull
following the expiration of the homebuyer tax credit at the end of
June,” the report says.

Weakness was also persistent in the commercial sector, where demand
“remained depressed” and vacancy rates were still “elevated.”

Of note, however, travel and tourism activity picked up, both in
business and leisure.

Along with stable or slightly declining lending activity, banks
also reported “some modest improvements in credit quality.”

Still, businesses were also “quite cautious,” especially “about
expansion plans.”

In the manufacturing sector, while activity expanded further, “the
pace of growth eased according to several Districts” and “Reports on
capacity utilization were mixed.”

In nonfinancial services, activity was also “largely stable” or
slightly up at best, although demand for temporary workers “remained on
an upward trend.”

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

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