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Fed says some districts report slowing economy
Customers shop during the grand opening of the Forever 21 flagship store in New York's Times Square June 25, 2010.
Credit: Reuters/Lily Bowers
WASHINGTON |
WASHINGTON (Reuters) - The economy kept growing overall in recent weeks, but unevenly and it actually slowed in a few regions as housing markets softened after the end of a popular tax break, the Federal Reserve said on Wednesday.
The U.S. central bank's latest Beige Book summary of national conditions, based on information before July 19, said activity "continued to increase, on balance" though Cleveland and Kansas City said business 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 the pace of economic activity had slowed recently," the Fed said.
The Beige Book reports on conditions in all 12 districts that are part of the Federal Reserve system and carries a high degree of credibility because it is based on interviews and anecdotal information from coast to coast.
The latest report, compiled by the St. Louis Fed Bank, covers seven weeks from the previous Beige Book in early June and painted a picture of less-than-robust recovery.
While manufacturing continued to expand in most districts, activity had slowed or leveled off in New York, Cleveland, Kansas City, Chicago, Atlanta and Richmond.
That fit with a report issued earlier on Wednesday by the government showing that new orders for costly manufactured goods unexpectedly dropped in June -- a second straight monthly fall that pointed to waning momentum in the factory sector.
Retail sales -- a gauge of consumers' economic participation -- were generally higher but modestly so.
"Several districts cited apparel, food and other necessities as recent strong sellers, while big-ticket items were weak sellers," the Fed said.
Most districts said new-car sales were declining and housing markets were sagging.
"Activity in residential real estate markets was sluggish in most districts after the expiration of the April 30 deadline for the homebuyer tax credit," the Fed said, referring to a now-expired $8,000 credit offered as an encouragement for first-time home buyers.
There was a modest improvement in labor markets, with several reports of temporary hiring. Consumer prices held steady in most parts of the country while wage pressures were described as "contained."
(Reporting by Glenn Somerville; editing by Andrew Hay and Jan Paschal)
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As states put their “balanced” budgets together they’ll be forced to either make severe cuts or increase taxes. Why? Because things have changed for the worse. Using MI:
1) Business tax revenue is down. The ailing have less income on which to pay taxes. To retain the healthy ones, the State and municipalities are giving tax abatements for modernization and expansion.
2) MI is mired in the old “manufacturing” world when increasingly there is less stuff produced but more services. Our inept legislature, like so many others, deferred to others to deal with that change.
3) MI already heard the Feds are expecting state to assume Medicaid costs, ie an increased $300M to $500M new expense to add to the cost side. This could be a backend Fed approach to reducing their deficits while piling onto states.
4) MI skirted through last year using stimulus dollars. Not going to happen this year. All the hurting MI cities are painfully aware revenue sharing will be DOWN and they to must CUT.
So, how does the state ask the hurting to pay more so the legislators don’t have to make tough decisions? Find it difficult to believe NEW taxes will be the solution. So, given all the layoffs, decreased services, increased suffering, it will be painfully aware how dire are our straits – not to mention that these cutbacks and layoffs serve to hurt others who sell to the state / municipalities or those who used to work for one!!
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