Fed Survey, Economic Data Signal Recession Is Easing
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BY KELLY EVANS
The pace of decline in economic activity has "moderated" or "begun to stabilize," the Federal Reserve's latest survey of regional economic conditions found, and a Commerce Department report showed the steep drop in U.S. business-investment spending appears to be bottoming out.
Both reports reinforced expectations that the recession that began in December 2007 may be nearing an end.
By KELLY EVANS
The pace of decline in economic activity has "moderated" or "begun to stabilize," the Federal Reserve's latest survey of regional economic conditions found, and a Commerce Department report showed the steep drop in U.S. business-investment spending appears to be bottoming out.
Both reports reinforced expectations that the recession that began in December 2007 may be nearing an end.
President Barack Obama, speaking Wednesday in Bristol, Va., said "we may be seeing the beginning of the end of the recession," adding that "the financial system is no longer on the verge of collapse" and the U.S. is "losing jobs at nearly half the rate we were when I took office six months ago."
The Fed's "Beige Book," a roundup of conditions across its 12 districts, suggested economic activity remains weak in many regions, but the slowing pace of decline is a marked improvement from previous reports.
Chicago and St. Louis, for example, reported the pace of decline in their regions "appeared to be moderating" from the prior report, while New York, Cleveland, Kansas City and San Francisco reported "signs of stabilization." But Minneapolis said its regional economy contracted since the previous report, released June 10. The report is done through interviews and surveys with local businesses.
While the report noted that households "continued to be price-conscious," signs of scattered improvement were seen in manufacturing, housing and even the labor market. Several regions reported hiring activity in health care, technology and manufacturing.
"There are a number of factors which suggest that the pace of recovery will be considerably slower than usual," Bill Dudley, president of the Federal Reserve Bank of New York, said in a speech before the Fed release, citing pressures on household incomes and wealth. The gray outlook, in turn, means it is premature for the Fed to consider tightening monetary policy, he added.
Most districts described manufacturing as "depressed but with selected signs of modest improvement." An uptick in production in some regions was attributed to the need to replenish customer inventories. Military products and pharmaceuticals saw strong demand or rising sales in some areas.
But travel and tourism declined in most districts. Freight and shipping volumes were reported well below year-ago levels in many areas. Commercial real estate was described as weak in all 12 districts. Banks in most regions continued tightening lending standards, particularly on commercial real estate, "due to concern over declining loan quality."
Meanwhile, the Commerce Department said new orders for durable goods -- big-ticket items such as computers and machinery -- declined in June by a seasonally adjusted 2.5% from May, to $158.6 billion. The drop was largely due to a drop in aircraft orders. Excluding aircraft and other transportation, orders rose 1.1%, the second straight gain.
A key gauge of business investment spending, orders for capital goods excluding aircraft and defense, rose 1.4%, the second monthly gain.
"The implication is that equipment investment should begin to level off in the third quarter after plunging over the previous year," said J.P. Morgan economist Abiel Reinhart.
Data released by the Labor Department showed June jobless rates in 372 metropolitan areas rose from a year ago; 18 recorded rates of at least 15%. Unemployment is highest in El Centro, Calif., at 27.5%, not seasonally adjusted.
