The Beige Book’s outlook

Jon MohrAt the Marine Dealer Conference & Expo last November, Brunswick CEO Dusty McCoy said [and I'm paraphrasing here] that while many of the recessions the U.S. economy has endured in the past are V-shaped (the economy drops quickly, bottoms out, then rebounds steeply as well) he expects our current recession will be more U-shaped - meaning we won't experience that quick bounce back. McCoy also said at the time that the economy was still on the left-hand side of the "U" and had not yet bottomed out. Where the economy stands today, some five months later, is a matter open for debate (if you would like to weigh in, please post a comment below), but if the latest Beige Book report issued the U.S. Federal Reserve is any indication, there are signs the economic freefall we've been in seems to be slowing, at least in some parts of the country.

For those that don't know, the Beige Book is a report issued by the Fed eight times per year that discusses economic conditions in each Federal Reserve district by gathering information from the Fed's officers in those districts and interviewing business contacts, market experts, economists, etc.

The latest report, issued April 15, finds that while the economy is still weak, five of the Fed's 12 districts report a moderation in the pace of decline and some have seen a low-level stabilization across various sectors.

Here is a summary of a few key findings:
- Consumer spending remained generally weak. However, several districts said sales rose slightly or declines moderated compared with the previous survey period. In particular, the Boston, Cleveland and Chicago Districts reported an improvement in sales.
- Although auto dealers continued to struggle and overall vehicle sales were sluggish in all reporting districts as weak demand and tight credit continued to limit sales, used vehicle sales improved slightly in the Boston, Cleveland, Kansas City and San Francisco Districts. New car sales remained feeble. Dealers in the Philadelphia District reported difficulty in obtaining financing for inventory purchases, and a few dealerships in the St. Louis District went out of business, but dealers in the Cleveland District reported minimal problems with floorplan financing. While auto dealers in the Boston, Cleveland and Kansas City Districts noted some improvements in the outlook; those in the Philadelphia and Dallas Districts expect continued weakness.
- Manufacturers' assessments of future factory activity improved marginally, with contacts in the Boston, New York, Philadelphia, Atlanta and Kansas City Districts noting a slight upturn in the outlook for production and sales. Capital expenditure plans remained on hold across most regions, and the Boston, Philadelphia and Cleveland Districts noted cuts in capital budgets.
- Demand for commercial and industrial loans was weak, and there were several reports that business borrowers were postponing capital expenditures.
- Credit availability generally remained very tight across regions. A number of districts reported deteriorating loan quality and rising delinquencies for all types of loan categories. In particular, several reports noted more stringent requirements for commercial real estate loans due to worries of worsening loan quality in the sector.

To read the full report for your district, click here: http://www.federalreserve.gov/fomc/beigebook/2009/

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