Beige book paints dark economic picture

Economic activity has slowed in the past month, with Americans buying fewer goods in all categories, according to the Federal Reserve’s June and July beige book report of economic activity, which it released today. The report indicated that consumer spending was sluggish or slowing in all but one of the 12 Federal Reserve districts, with Cleveland being the exception. Consumer spending normally accounts for about two-thirds of U.S. economic growth. The report also indicated “restrained” loan growth, with residential and consumer lending “showing more weakness” than commercial lending. There was also worrisome information on inflation, with all 12 districts indicating that price pressures were “elevated or increasing.” Wage pressures were also said to be “elevated or increasing.” The Fed offered a grim outlook for some regions. “While several districts reported widespread weakness in the financial services, auto and construction industries. contacts in the Cleveland, Atlanta, Chicago and Kansas City districts reported very little upward wage pressures, with the exception of the energy and skilled labor markets,” according to the report. “San Francisco noted some downward movement in wages for construction, finance, real estate and retail jobs. But Boston and Dallas said more workers were requesting wage adjustments to supplement cost of living increases,” according to the report. The news, along with a dismal report on existing home sales, sent stocks lower. At around midday, the Dow Jones Industrial Average was down about 1.13%, and the Standard & Poor’s 500 stock index was off about 1.12%. The Nasdaq Composite Index, meanwhile, had fallen about 0.98%.