The latest Beige Book report on the state of the economy was just released by the Fed. The summary suggests we’re seeing more stability and/or gradual improvement in the economy:
“Reports from the twelve Federal Reserve Districts indicate that economic conditions have generally improved modestly since the last report. Eight Districts indicated some pickup in activity or improvement in conditions, while the remaining four–Philadelphia, Cleveland, Richmond, and Atlanta–reported that conditions were little changed and/or mixed.”
On housing, the report confirms my prediction months ago that the market was slowly but surely finding its footing. But the outlook for commercial real estate remains pretty awful. A brief excerpt:
“Residential real estate conditions were somewhat improved from very low levels, on balance, led by the lower end of the market. Most Districts reported some pickup in home sales, though prices were generally said to be flat or declining modestly; residential construction was characterized as weak, but some Districts did note some pickup in activity. Commercial real estate markets and construction activity were depicted as very weak and, in many cases, deteriorating.”
Other nuggets of information: Retail sales have a better tenor. The job market still stinks, but is not getting worse. Lean inventories will likely need to be rebuilt. Lending conditions remain tight, while demand for new credit is anemic.
All in all, it’s a “blah” report — not so hot, not so cold.
Related posts:
- Beige Book: The economy stinks … again I used that headline before, minus the word “again.” I think it’s time to dust it off and throw it...
- Housing starts, permits fall again in April; Weakness concentrated in multifamily The government just provided its latest look at housing construction and permitting activity. Here’s what the April numbers showed …...
- May existing home sales climb 2% We just got May existing home sales data from the National Association of Realtors. Here’s what the numbers looked like...
{ 4 comments… read them below or add one }
Mike- Is there somewhere you can grab numbers on commercial property?
In Florida there is just a God-awful number of huge residential new towers completely finished and virtually empty. Tampa, St. Petersburg, Fort Myers, Naples, Miami, South Beach, Clearwater, etc… I know because I have seen them.
It is probably worse in CA and NV.
Since the Fed got rid of “mark-to-market,” the balance sheets of banks are pure baloney. Laugable even. So even if the banks are in trouble because they hold the non-paying commercial loans on these monsters, there is no way to know. Technically, Sheila Bair can legally ignore those problem properties/banks which is exactly the Feds plan. Hide the truth to avoid panic.
Now we all know, the Fed is giving money to the banks at 0% interest so cash flow will never catch up to reality on banks that hold the loans on empty monsters.
One reason I ask you about this, because those are really “residential” homes but don’t show up on the books at all. They are only able to sit empty because of the free money policy of the Fed and the abolishment of mark-to-market accounting.
Even though they are in plain sight, no one wants to speak about them and what they will do to residential prices if they flooded the market.
Well, it is just another reason I don’t think we have reached the bottom in residential. A lot of “commerical” IS residental but no one (banks and Fed) wants to do anything about it, or even talk about it. It seems to be taboo for now.
I just cannot imagine the NAR cheerleaders actually counting these empty monster’s homes, project by project, in their currently optimistic figures they push. –MichaelM
MichaelM, great points!
They are also letting non-payers sit in jumbo loan homes for months, going on a year, without even sending a default warning.
Seems our new “plan” is “see no evil, hear no evil…”
I read, and don’t know the validity of the source for the article, that the Fed is telling major banks they need to restrict commercial lending more next year (which they are already doing this year), which will result in thousands more lost jobs, which will result in thousands more foreclosures.
The Beige Book may be saying, “steady as she goes” but on the ground, it is getting harder by the day. And Congress’ only plans seem to be to make sure they take more money from the struggling working man and gift to the special interests.
Lollipops and sunshine, just lollipops and sunshine
Mike,
I have recently been receving your newsletter and I am confussed on where you stand on the economic recovery. You sometimes say there is no doubt that there is a economic recovery. I am out here in the real world and deal with small businesses on a daily basis and I guarantee there is NO recovery and it is getting worse very quickly. I also know there will be an actual economic collapse sometime this year (2010). So with that knowledge, now what do we do? You might want to save this e-mail and refer back to it in a few months.
Thanks
There is no doubt in my mind there is a recovery, but it is one that is relatively weak vs. what we have seen post-other recessions. At some point maybe we collapse again and maybe it hasn’t filtered down to all sectors and segments of the economy (today’s jobs report makes that clear). But every piece of economic data looks better now than it did a year ago. Ergo, a recovery is an empirical fact.