Beige Book: Economy remains stagnant
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The Federal Reserve Wednesday, in its "Summary of Commentary on Current Economic Conditions" known as the Beige Book, drew a picture of an economy that is limping along at a pace described as "measured."
Major hits to the economy, such as Hurricane Sandy and the drought in the Midwest, have slowed areas of economic growth while manufacturers reported they are concerned about their prospects for 2013 because of the impending "fiscal cliff."
Companies in the New York region, which was the hardest hit by Hurricane Sandy, generally expressed optimism that they would recover and in some cases do better than they would have because so much needs to be replaced after the damage caused by the hurricane.
While Sandy's damage to agriculture was confined mostly to coastal areas, the drought that is still affecting the Great Plains has hurt the emergence of winter wheat and could keep feed prices high.
In the Cleveland District, which includes Pittsburgh, the economy was moving along a little better than the nation as a whole. Factories reported that new orders were up and production had increased.
Those increases were reported in the auto industry and in aerospace, construction machinery, medical devices, and oil and gas. Steel producers said that shipping volume was down slightly because of weaker international demand.
In real estate, housing starts were up over this same time in 2011 with sales strongest in the higher-priced homes. Builders are also feeling wage pressures to hire people in the skilled trades because of a lack of qualified workers.
Builders reported that the costs of drywall and lumber are going up because of curtailed production from suppliers.
Consumers in the region cut back their spending in home furnishings but there was an increase in sales of new cars compared to last year. Buyers were mostly interested in fuel-efficient cars and SUVs. Truck sales were also up, though one dealer said trucks are in short supply. Used car sales were also up slightly.
The banking sector continues to keep credit fairly tight. Micro-businesses reported that they are having trouble obtaining loans and small businesses found that while they could obtain credit, the collateral requirements are tougher than before the recession and personal guarantees are often required.
Bankers reported that there was strong activity in the residential mortgage market, with a lot of the movement in refinancing, but also increased activity in real estate sales.
In the energy sector, conventional drillers for oil and natural gas in the district said production held steady in the last six weeks. with most planning to increase production. Gas production in the shale ranges was described as continuing at a "robust pace."
Coal production, however, continued to suffer, with reports that companies had idled their mines because of a decrease in demand from utilities and overseas customers and because of stricter regulatory requirements.
First Published November 29, 2012 12:00 am