WASHINGTON (MNI) – The following is the second and final part of
the text of the Federal Reserve’s Beige Book survey Third District
summary, published Wednesday:

Finance

Total outstanding loan volume at most of the Third District banks
contacted for this report has been virtually level since the last Beige
Book. Commercial bank lending officers said there has been a slight
increase in credit extended on home equity lines, but practically no
change in outstandings in other credit categories. Bankers continued to
report low demand for both consumer and business loans. ‘It’s still a
deleveraging story,’ one banker said. Commercial bank officers indicated
that credit quality has been steady or has improved slightly since the
last Beige Book.

Looking ahead, Third District bankers expect little, if any, growth
until both consumer and business confidence strengthen. Some bankers
said business lending could begin to move up in the near term, but the
consensus was that loan growth overall will be slight until there are
clear signs that economic conditions are improving.

Real Estate and Construction

Contacts in residential real estate markets reported that the low
rate of sales that took hold after the expiration of the federal income
tax credit for home purchases has persisted into July and August for
both new and existing homes. For both new and existing homes, contacts
reported little change in prices, and they noted that lower-priced homes
continued to sell at a relatively better pace than higher-priced homes.
Residential real estate contacts expect sales to remain slow during the
fall and winter. Although the inventory of homes for sale has not
changed much recently, some contacts expect an increase in the spring of
next year. One agent said, ‘A lot of people who don’t need to sell right
now have taken their homes off the market, and they will probably jump
back in as soon as the market appears to be coming back.’

Nonresidential real estate firms indicated that there has been
little change in commercial and industrial markets since the last Beige
Book. Contacts reported that purchases of incomeproducing properties by
investors have picked up somewhat, but they said that commercial
construction activity remains very slow, and there are few, if any,
indications that new projects will be started in the near future.
Commercial real estate contacts expect market conditions to show little
change for at least the rest of the year. They believe that recent
increases in available space are likely to restrain lease rates and, as
one said, ‘Put a damper on future construction.’

Services

Service-sector firms generally reported minimal gains or flat rates
of activity since the previous Beige Book. A large business services
firm reported that client companies were not contracting for as much
business as they had indicated earlier in the year. Several health-care
organizations noted recent flattening in activity that is interrupting a
long growth trend. In contrast, some temporary employment agencies noted
that demand had picked up recently. Looking ahead, most of the services
firms contacted for this report expect growth to be slow for the rest of
the year. Some have reduced their forecasts; as one contact said, ‘It
looks like we were a little too optimistic earlier this year.’

Prices and Wages

Reports on input costs and output prices indicate little change
since the last Beige Book. Most of the manufacturing firms polled in
August reported no change from July in the costs of the commodities they
use or the products they make. However, producers of primary metals and
wood products raised prices. Construction firms gave mixed reports on
prices, with some noting steady materials costs and some indicating
increases for a variety of materials. Retailers generally noted that
both wholesale costs and retail prices have been mostly steady, although
several indicated that they expect wholesale price increases from their
suppliers during the fourth quarter of this year.

Business firms in the region reported no significant change in
wages. Employment agencies reported that client companies have begun to
fill positions that have been open but do not appear to be adding
employees. Some staffing firms said client companies are looking to rely
more on temporary and contract workers to meet variable and uncertain
workloads, rather than hiring permanent employees.

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

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