What the Feds think

Every 6 or 7 weeks, the Federal Reserve issues its comments from prior meetings and essentially how it sees the current state of the economy throughout the US. Below are a Nasdaq summary of the comments from the Beige Book (as its called) released today at 2pm:

"The Fed's latest Beige Book, containing up-to-date anecdotal economic news from 12 District Banks, indicates that economic activity continued to stabilize in July and August. Some Banks even reported "signs of improvement." The outlook for economic activity among Fed business contacts remained "cautiously positive."

For the consumer sector, most Districts reported flat retail sales while most indicated that the "cash-for-clunkers" program boosted auto sales. Importantly, residential real estate is improving in most markets but downward pressure on home prices continued in most Districts. The market for commercial real estate is weak and nonresidential construction continued to decline.

Credit markets remain tight and this is still a concern for the Fed as some Districts indicated a weakening in loan demand while others reported scattered improvement. Mortgage activity was mixed in direction. Lack of available credit is said to be holding back residential and commercial construction.

Wage pressures were described as "minimal," reflecting "weak" labor markets. However, some Districts report an uptick in temporary hiring and a decline in the pace of layoffs. The gain in temporary workers is good news as it often is a leading indicator for overall hiring over the business cycle. Retail prices were generally steady.

A notable positive from the Beige Book is that most Districts reported modest improvements in the manufacturing sector with many Districts reporting slight-to-moderate increases in new orders. A majority of Districts indicated that manufacturers see the near-term outlook as "cautiously optimistic."

The bottom line is that the latest Beige Book reports that the economy is on track for recovery, although a slow one. The Fed still has ample room for continued to keep liquidity in markets as both wage and price pressures are minimal."