Fed's Beige Book Depicts Growth in All Economic Areas Except Housing

The U.S. economy ended 2011 in better standing than earlier in the year, according to the Federal Reserve’s polling of key business contacts, economists, and market experts throughout its 12 regional districts.

Opinions gathered from these local insiders are published in regular editions of the Fed’s Beige Book, a compilation of anecdotal information illustrating current economic conditions across the country. The central bank’s latest Beige Book rendition covers the reporting period from mid-November through the end of December.

On the whole, Beige Book findings indicate the economy expanded at a “modest to moderate pace,” representing an improvement from the “slow to moderate pace” description cited in the November report.

Seven districts characterized growth as modest. Of the remaining five, New York and Chicago noted a pickup in the pace of growth, Dallas and San Francisco reported moderate growth, and Richmond indicated that activity flattened or improved slightly.

Compared with prior summaries, the Federal Reserve says the regional reports, on balance, suggest ongoing improve-
ment in economic conditions in recent months – and that’s without the typical recovery model in which housing serves as a primary contributor to economic expansion.

Across the board, Fed districts labeled residential real estate as “sluggish.” Activity in regional markets largely held steady at very low levels, with the exception of further increases in the construction of multifamily residences, the central bank reported.

The pace of single-family home sales remained depressed throughout the country, although the Dallas district reported a modest increase over the prior reporting period.

Some districts, such as Boston and Atlanta, noted that home sales exceeded levels from 12 months earlier, but mainly because the earlier levels reflected a substantial drop following the expiration of the homebuyers’ tax credit in mid-2010.

Prices were largely stable on a short-term basis in most areas but in many instances were below their year-ago levels, according to the Fed.

Extensive inventories of distressed properties were reported to be a source of price restraint in the Boston, Richmond, Chicago, and San Francisco districts.

Construction of single-family homes remained at low levels in most districts and fell further in such areas as Philadelphia, St. Louis, Minneapolis, and Kansas City. Cleveland, however, reported that activity improved during the past couple of months.

In contrast to the soft market for single-family residences, the market for rental units tightened in New York and Richmond, while construction of multifamily residences rose in the Boston, Philadelphia, Chicago, Kansas City, and Dallas districts.