By Tracy Will
In the new edition of the Federal Reserve’s Beige Book, the Fed’s assessment of U.S. economic activity remains bearish, and the Chicago branch said “the expectation of most contacts was for economic activity to remain weak into late 2009 before slowly beginning to recover in 2010.”
Across several economic sectors, reports from finance, industrial manufacturing, tourism, housing, and agriculture show lower prices for commodities, easing pressure on consumers, and slight increases in wages in the Midwest.
“Agriculture producers benefited from declining input prices on net, but these were not large enough to offset slower sales and lower product prices, which put downward pressure on profit margins and land values,” according to the Chicago Fed Branch. Spring planting is still an open question, “though shifts toward soybeans and away from corn are likely to occur,” according to the report.
The Chicago Fed reported auto dealers reported increases in used car sales and continued gains in auto services, despite depressed new car sales. Unemployment continued its rise in the region, but many employers decreased hours in order to retain employees, protecting trained staff once the upturn arrives.
“Hiring activity remained low, outside of lower-end retail companies, healthcare, environmental related businesses and highly skilled professionals in financial services and information technology,” according to the report.
Housing prices continued their decline, but reduced sale prices have not sparked purchases because, “tighter secondary markets for mortgages and credit standards along with lower home values have resulted in a much higher rejection rate of applications during the recent ‘refi’ boom relative to a year ago.”
Industrial manufacturing continued sluggish performance despite a slight uptick in steel production. Large truck and precision tools demand remained light, as was demand for mining equipment from international customers. Manufacturing are aggressively reducing inventories as contracts for new production has also slowed.