Bloomberg Anywhere Remote Login Bloomberg Terminal Demo Request


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

Fed’s Beige Book Says U.S. Economic Recovery Slowed

Ben S. Bernanke, chairman of the U.S. Federal Reserve
Ben S. Bernanke, chairman of the U.S. Federal Reserve, listens during a forum in Detroit. Photographer: Jeff Kowalsky/Bloomberg

The Federal Reserve said U.S. economic growth slowed in some areas over the past two months, dragged down by commercial real estate and the expiration of a tax credit for homebuyers.

“Economic activity has continued to increase, on balance, since the previous survey,” the central bank said today in its Beige Book business survey, while noting that two of the Fed’s 12 districts reported the economy “held steady” and two said the pace of expansion slowed.

The report underscored the Fed’s view that the recovery, while still moving forward, is progressing at a slower pace than earlier in the year. Fed Chairman Ben S. Bernanke said in congressional testimony last week that the central bank expects “continued moderate growth” and noted that the economic outlook remains “unusually uncertain.”

The Fed reported improvements in service industries, an increase in tourism, an expansion of manufacturing and progress in labor markets.

“Growth still appears to be positive but pretty lackluster,” said Scott Brown, chief economist for Raymond James & Associates Inc. in St. Petersburg, Florida. “From this and judging from Bernanke’s testimony it doesn’t seem likely to act to boost the economy anytime soon.”

Treasuries extended gains after the report. The yield on the current five-year note dropped 9 basis points, or 0.09 percentage point, to 1.70 percent at 4:22 p.m. in New York, according to BGCantor Market Data. The Standard & Poor’s 500 Index fell 0.7 percent to 1,106.13.

Eisenhower Era

Yields on Treasuries this year have reached the lowest level during an economic expansion since the Eisenhower administration.

The nation’s unemployment rate, at 9.5 percent last month, is higher than the 10-year average level of 5.8 percent. About two-thirds of Americans view the country as headed in the wrong direction, according to the most recent Bloomberg National Poll, conducted July 9-12.

The survey, published two weeks before the Federal Open Market Committee next meets, offers anecdotal evidence that will help central bankers weigh changes in an economy where confidence has slipped in recent months. The New York-based Conference Board said yesterday that its survey of consumer sentiment fell to the lowest level in five months.

‘Discouraging’ Data

“I thought that the stress might be more on how much things had weakened,” David Resler, chief economist at Nomura Securities International Inc. in New York, said in an interview with Bloomberg Television. “In recent months we’ve seen discouraging economic data, leading some people to fear a double dip in the economy. Nothing here suggests that there is that deterioration.”

Fed policy makers “expect continued moderate growth, a gradual decline in the unemployment rate and subdued inflation over the next several years,” Bernanke told Congress last week. Business investment in equipment and software “appears to have increased rapidly” in the first half, and “stronger exports” have aided U.S. manufacturing growth, he said.

“Nearly all districts reported sluggish housing markets in the months since the homebuyer tax credit expired on April 30,” according to the report released today.

In June, housing starts fell to the lowest level in eight months. Work began on a fewer-than-forecast 549,000 houses at an annual rate, according to a Commerce Department report last week.

Real Estate

Activity in commercial real estate, especially construction, “remained weak,” the Fed said.

The Commerce Department will report Friday that the economy grew at a 2.5 percent pace in the second quarter, according to a Bloomberg survey of economists. The economy grew 2.7 percent in the first three months of 2010.

The economy’s “rough patch” in recent months isn’t the start of a sustained slide back into a recession, John Williams, research director for the San Francisco Fed, said today.

“Although discouraging, the recent softness in the economic data looks much more like a bump in the road” than “a swerve into the ditch,” he said in a speech.

Manufacturing “continued to expand in most districts, although several districts reported that activity had slowed or leveled off during the reporting period,” the report said.

Last week, Caterpillar Inc., the world’s largest maker of construction equipment, raised its full-year earnings forecast on increasing demand for mining, energy and rail equipment in developing countries. Machinery sales in North America increased 43 percent in the quarter, and 62 percent for Asia-Pacific region and more than doubled in Latin America, the company said.


Western Union Co., the world’s biggest money-transfer business, posted second-quarter profit that beat analysts’ estimates as U.S. transactions increased.

“When the economy picks up in different parts of the world, we feel we’re very well positioned to respond,” Chief Executive Officer-elect Hikmet Ersek said in an interview yesterday. “We see a little bit better situation in the U.S.”

The Fed’s district banks of Cleveland and Kansas City reported economic activity “generally held steady,” today’s report said. The Atlanta and Chicago Fed said the “pace of economic activity had slowed recently.” Their outlook was less optimistic than the previous Beige Book on June 9, when the Fed said that economic activity had “continued to improve” in all twelve districts at a “modest” pace.


Districts noted “improved conditions” in service industries and said tourism picked up. The Atlanta district reported “concerns about decreased leisure travel to the Gulf Coast.”

For consumer spending, the Fed said “reports on retail sales during the earlier summer months were generally positive” noting that “the increases were modest.”

Labor market conditions “improved gradually in several districts,” the Fed said. Five districts reported that labor markets improved, and two reported employment was steady. Five districts said demand for temporary hires had increased.

The pace of hiring at companies in the U.S. slowed in recent months. Private employers hired 83,000 people in June and 33,000 in May, according to a July 2 Labor Department report. In April, companies hired 241,000 people.

Delta Air Lines Inc., the world’s largest carrier, has 1,000 airport job openings as it hires workers at its 25 biggest U.S. airports to help with planes that are flying with near- record percentages of seats filled and cope with weather disruptions.

Delta Hiring

The Atlanta-based airline anticipates getting 65,000 applicants for the openings, according to a recorded message to employees from Chief Executive Officer Richard Anderson earlier this month.

Today’s Beige Book reflects information collected on or before July 19, and summarized by staffers at the St. Louis Fed.

Reports on banking conditions were “largely mixed.” The Richmond Fed reported increasing activity, and the Kansas City Fed said loan demand increased modestly. Three districts said loan demand was weak while two districts said total loan volume was flat.

Prices for consumers were “relatively stable in most districts,” the report said and “wage pressures remained largely contained across most districts.”

The Fed’s preferred gauge for the trend of inflation -- the core personal-consumption expenditures price index, minus food and energy -- rose at an annual rate of 1.3 percent in May, below the Fed’s target for inflation of 1.7 percent to 2 percent.

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.