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 “national economic activity continued to rise,
albeit at a modest pace” between September and the beginning of October.

This is little changed from the early September report that said
“Economic growth at a modest pace was the most common characterization
of overall conditions.”

So once again, pressures on both consumer prices and wages remained
subdued, with hiring “limited.”

Lending activity, the Fed added, was generally stable, as was
credit quality.

In the real estate sector, things were also little changed, as
housing markets remained weak, although reports suggested price
stability.

Looking ahead, “Respondents outlooks suggested sales and
construction would remain subdued through year-end,” in line with
“elevated” or even rising home inventories.

Commercial real estate also experienced “subdued” conditions,
according to the information collected through October 8 by the Federal
Reserve Bank of Dallas.

In other sectors, “Manufacturing activity continued to expand, with
production and new orders rising across most Districts,” the report
said. The report also noted that inventories were “light or in line with
orders.”

However, “Hiring at manufacturing firms remained sluggish,” and
going forward, capital spending plans appear limited.

In the retail sector, while “Retail spending was flat to moderately
positive in most Districts,” news in autos were more upbeat.

“New vehicle sales held steady or rose during the reporting
period,” the Beige Book reads, adding that “sales of used automobiles
were strong as well,” while inventories were tight.

In fact, “Used car prices rose, reflective of solid demand and lean
inventories.”

And the outlook remains positive as respondents expect “slight
growth in sales through year-end.”

Even travel and tourism activity improved over the period,
confirming a trend that was already reported in the September report.

That said, consumers continued to show signs of caution as they
mostly continue to focus their purchases on necessities, the survey
says, noting that while spending increased, “consumers remained
price-sensitive, and purchases were mostly limited to necessities and
nondiscretionary items.”

Households are indeed facing ongoing limited hiring from
businesses, many of them “reluctant to add to permanent payrolls given
economic softness.”

Even reports for temporary hiring were “mixed.”

Against this backdrop, wage pressures are “minimal.”

Consequently, businesses, while facing higher input costs due to
rising agricultural commodities and industrial metals prices in
particular, find themselves unable to pass them through to consumers.

Consumers are also experiencing “sluggish” lending despite
“scattered reports of improvement,” especially in “residential mortgage
lending and refinancing activity,” which rose in several Districts.

Still, overall lending was “stable at low levels” in most
Districts.

On the commercial and industrial side, “loans remained weak as
businesses continued to postpone capital spending plans because of
economic and public policy uncertainties.”

Overall credit quality was little changed, the survey said.

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

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