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MNI (Washington)
WASHINGTON (MNI)

The U.S. economic recovery was modest in August with activity well below pre-pandemic levels, the virus lingering in some regions and fiscal stimulus running out, the Fed's Beige Book showed on Wednesday.

The speed of consumer spending growth slowed, factories called back workers while service industries saw more permanent layoffs as demand remained soft, the Fed said. Many companies noted concerns about child care and the upcoming school year constrained worker availability.

Commercial real estate shrank further, while energy and agricultural sectors had "little expectation of near-term improvement" due to low prices and demand, the report said. Price pressures generally rose but "remained modest."

"Continued uncertainty and volatility related to the pandemic, and its negative effect on consumer and business activity, was a theme echoed across the country," the survey of regional conditions through Aug. 24 showed. "While the overall outlook among contacts was modestly optimistic, a few Districts noted some pessimism."

Other highlights of the report for FOMC officials ahead of their Sept. 15-16 meeting:

  • New York Fed District: "Banks reported increased loan demand, tighter credit standards, and further widespread increases in delinquency rates. Overall, business contacts have become less optimistic about the near-term outlook."
  • "New York City's rental market has been particularly weak, with vacancy rates reaching multi-year highs in Manhattan and rents down roughly 10 percent from a year ago with increased landlord concessions."
  • Philadelphia: "Uncertainty is extremely high as contacts await layoffs, evictions, foreclosures, and bankruptcies while the coronavirus persists and the stimulus ends."
  • Cleveland: "A number of contacts reported that ongoing shortages of trucks made it difficult to meet customer demand."
  • Richmond: "Some contacts cited skills mismatches as a barrier to finding the workers they needed while others believed that the generous unemployment insurance benefits had discouraged workers from applying for available jobs.... Many firms said they were trying to figure out how to provide flexibility to workers with children schooling at home."
  • Atlanta: "Contacts continued to note muted input costs and little to no pricing power."
  • Chicago Fed District: "Manufacturing production increased strongly in July and early August, but remained below where it was before the pandemic began. Auto production again grew sharply, though the pace of growth was slower than the previous reporting period."
  • Dallas: "Increasing COVID-19 infections in the Eleventh District have disrupted the budding economic recovery in some sectors and is the biggest risk to the near-term outlook." "Energy activity remained depressed. Activity in the housing market was a bright spot, with home sales rising sharply."
MNI Washington Bureau | +1 202-371-2121 | jean.yung@marketnews.com
MNI Washington Bureau | +1 202-371-2121 | jean.yung@marketnews.com

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