Beige Book (January 2010)

The Fed uses this Beige Book data in its policy decision making, with its next FOMC policy meeting scheduled for January 26-27.

Visit the front page of Wall Street Greek to see our current coverage of Wall Street, economic reports and global financial markets.

(Relative Tickers: NYSE: RHI, NYSE: MAN, NYSE: MWW, NYSE: KFY, NYSE: JOB, Nasdaq: JOBS, OTC: GEYH.PK, Nasdaq: CECO, NYSE: BAC, NYSE: FRE, NYSE: FNM, NYSE: GS, NYSE: MS, NYSE: WFC, NYSE: TD, NYSE: SRS, NYSE: URE, NYSE: IGR, NYSE: XIN, Nasdaq: RYHRX, Nasdaq: TRREX, NYSE: TOL, NYSE: HOV, NYSE: DHI, NYSE: BZH, NYSE: LEN, NYSE: KBH, NYSE: PHM, NYSE: NVR, NYSE: GFA, NYSE: MDC, NYSE: RYL, NYSE: MTH, NYSE: BHS, NYSE: SPF, NYSE: MHO, AMEX: OHB, NYSE: VNQ, NYSE: WMT, Nasdaq: AVTR, NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ, NYSE: NYX, NYSE: DOG, NYSE: SDS, NYSE: QLD)

Beige Book

The Federal Reserve released its Beige Book of economic indicators today. The Fed uses this data in its policy decision making, with its next FOMC meeting scheduled for January 26-27. The report noted modest overall economic improvement, including a broadening of geographic gains. Only two of the twelve Fed districts reported mixed conditions, while the rest showed economic growth; that compared against four static districts at last check. Philadelphia and Richmond were the two stragglers this time around.

Retail sales, including auto sales, generally rose through the holidays across markets, while inventories remained lean. Though Philadelphia and San Francisco noted that 2008 had shifted so far south of 2007, that 2009's increase did not really represent a significant trend change. Consumers remain cautious, price sensitive and necessities driven. Cleveland and Richmond reported even worse shopping activity this year.

Nonfinancial services activity generally improved, as did manufacturing activity. Boston seemed especially positive, reporting widespread activity in advertising, consulting, private equity firms, healthcare, biotechnology, education, and government services. Also, New York noted a general up-tick. Hiring through staffing firms like Robert Half (NYSE: RHI) and Korn Ferry (NYSE: KFY) was reported up in New York, Cleveland, Chicago, and Dallas with office and health care workers in greatest demand. Direct firm hiring was reported up in the St. Louis District, flat in Dallas, flat to down in New York, and down in Richmond.

Manufacturing activity mostly improved, with several districts reporting the driving factor as Asian demand. Manufacturers' expectations for the near future as reported from the Boston, Chicago, Cleveland, Kansas City, New York, and Philadelphia Districts were all optimistic, although Kansas City firms were less optimistic than the last report. Capital spending plans remained more cautious. Only Boston and Philadelphia reported that firms were planning to increase capital spending in the current year.

Freight shipping volumes were up slightly in the Atlanta, Cleveland, and Dallas Districts, while Kansas City reported a slight slowdown in activity. The Richmond District's port activity gained from increased international trade, especially imports of high-end vehicles, but intermodal firms in the Dallas District reported that imports dropped and exports flattened producing no increase in cargo volumes.

Homes sales increased toward the end of 2009 in most Federal Reserve Districts, except San Francisco, where demand for housing has been steady, and Kansas City, where residential real estate activity has eased since the last Beige Book. Home prices were stable in comparison to last month's data. Lower priced homes were most in demand, reportedly due to the First-Time Homebuyer Tax Credit. In several Districts real estate contacts reported that the original expiration date for the tax credit boosted sales in November and led to a more than usual slowdown in sales in December. However, some district contacts noted that the extension of the credit into 2010 could give an added impetus to the expected seasonal sales upturn this spring.

Construction activity and commercial real estate remained a national sore point. Though home building was reported to have increased in the Chicago and Minneapolis Districts. Commercial real estate continues to see rising vacancies and falling rent. New York, Philadelphia, Kansas City, and San Francisco reported further weakening in demand for commercial and industrial space. Boston received mixed reports on sales and leasing activity from commercial real estate contacts in the District, and Minneapolis reported some increases in sales of commercial buildings. Richmond reported that sales of nonresidential properties remained slow, but that leasing of office and retail space has picked up. Vacancy rates were rising and rents were declining in most Districts. Several Districts reported that landlords were focused on tenant retention and that slack demand was allowing tenants to negotiate lease extensions at low rents and with favorable allowances.

Loan demand remains generally weak and credit quality continues to deteriorate. St. Louis, Kansas City, Dallas, and San Francisco noted general declines or soft loan demand. New York reported declining demand for all types of loans except residential mortgages for which demand has been steady. Philadelphia reported continuing declines for all categories of credit. Cleveland noted declining demand for business loans and underutilization of commercial credit lines. Richmond reported that commercial and industrial loan demand was steady to slightly up since the last Beige Book but still down year-to-year. Chicago noted low utilization of commercial credit lines but an uptick in financing of mergers and acquisitions.

Labor conditions remain generally soft, with a few of the districts reporting hiring activity. Pricing conditions remained generally stable, though increases were seen in metals. Firms in the New York, Philadelphia, and Chicago Districts noted some increases in the cost of the inputs they use. Agricultural commodity prices were reported on the increase by Chicago, Kansas City, and Dallas. Most Districts reported that retail prices have been steady.

In conclusion, the report seems consistent with the Fed's recent view of things. Based on our analysis of this data, we would not look for a rate change when the FOMC meets later this month.

Editor's Note: Article should interest investors in: Robert Half (NYSE: RHI), Korn Ferry (NYSE: KFY), Manpower (NYSE: MAN), Monster World Wide (NYSE: MWW), General Employment Enterprises (NYSE: JOB), Global Employment Holdings (OTC: GEYH.PK), Career Education (Nasdaq: CECO) and 51job Inc. (Nasdaq: JOBS), Bank of America (NYSE: BAC), Freddie Mac (NYSE: FRE), Fannie Mae (NYSE: FNM), Wal-Mart (NYSE: WMT), Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), Wells Fargo (NYSE: WFC), Toronto Dominion (NYSE: TD), UltraShort Real Estate ProShares (NYSE: SRS), Ultra Real Estate ProShares (NYSE: URE), ING Clarion Global Real Estate Income Fund (NYSE: IGR), Xinyuan Real Estate Co. (NYSE: XIN), Rydex Real Estate Fund H (Nasdaq: RYHRX), T. Rowe Price Real Estate Fund (Nasdaq: TRREX), Toll Brothers (NYSE: TOL), Hovnanian (NYSE: HOV), D.R. Horton (NYSE: DHI), Beazer Homes (NYSE: BZH), Lennar (NYSE: LEN), K.B. Homes (NYSE: KBH), Pulte Homes (NYSE: PHM), NVR Inc. (NYSE: NVR), Gafisa SA (NYSE: GFA), MDC Holdings (NYSE: MDC), Ryland Group (NYSE: RYL), Meritage Homes (NYSE: MTH), Brookfield Homes (NYSE: BHS), Standard Pacific (NYSE: SPF), M/I Homes (NYSE: MHO), Orleans Homebuilders (AMEX: OHB), Vanguard REIT Index ETF (NYSE: VNQ) and Avatar Holdings (Nasdaq: AVTR).


Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.