Thursday, December 3, 2009

Fed's Beige Book Shows Mixed Results

The U.S. economy "improved modestly" since early October, according to the Federal Reserve. Consumer spending picked up, and commercial real estate weakened.

According to the "beige book" survey of economic conditions, business continued cutting employment is November, although at a slower pace than in prior months. Private-sector U.S. jobs declined 169,000 in November, less than the 195,000 drop reported in October. Additionally, the Fed found little to no upward pressure on wages and overall prices remained stable, giving the central bank flexibility to keep interest rates low.

Despite rising unemployment, consumer spending strengthened in November. Auto sales improved, in part a rebound from the dip following the "cash for clunkers" rebate program. Overall merchandise sales improved, with retailers holding leaner inventories during the holiday season. Overall, the Fed's report indicated subdued economic recovery. Manufacturing conditions were "steady to moderately improving," while the service sector "generally strengthened somewhat."

The Fed's assessment of commercial real estate was worse than for the residential market. Conditions "were reported to have weakened in virtually all districts, with rising vacancy rates, downward pressure on rents, and little if any new development.

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