Economic conditions in the country “have generally improved modestly” in the last two months, according to the Federal Reserve’s “Beige Book” issued in advance of the December 15-16 meeting of the Federal Open Market Committee.

Still, that conclusion – based on anecdotal reports of the 12 Federal Reserve districts – does not suggest any change in interest rates or monetary policy set by the FOMC.

According to the Beige Book, formally the “Summary of Commentary on Current Economic Conditions By Federal Reserve District,” eight of the 12 districts saw “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.” Significantly, no district reported a decline in activity.

The Beige Book found no signs of inflation as most districts reported stable selling prices. While some districts reported “upward pressure” for commodity prices, “they saw little or no indication of upward wage pressures or of any significant increase in prices of finished goods.”

But while the overall conclusion was upbeat, the Beige Book said “labor market conditions remained weak since the last report” on October 21. “Commercial real estate markets and construction activity were depicted as very weak and, in many cases, deteriorating.” And, the Beige Book said, labor conditions were weak “with further layoffs, sluggish hiring, and high levels of unemployment.”

There were some positive signs:
    • Consumer spending was reported to have picked up but non-auto retailers were holding lean inventories going into the holiday season.
    • Manufacturing conditions were described as “steady to moderately improving;”
    • Conditions in the non-financial service sector “generally strengthened;”
    • Residential real estate conditions were “somewhat improved” albeit from “very low levels;” and
    • Financial institutions generally reported steady to weaker loan demand, continued tight credit standards, and steady or deteriorating loan quality.

Regionally, consumer spending strengthened with non-auto sales reported to have picked up in the New York, Philadelphia, Cleveland, Richmond, Atlanta, Kansas City, and San Francisco districts. Auto sales, according to the report, bounced back from a dip following the end of the “cash-for-clunkers” program with New York, Philadelphia Chicago, St. Louis and Dallas reporting increased vehicle sales.

Sales were “flat or mixed” in the Cleveland, Minneapolis, Kansas City, and San Francisco Districts. “A number of districts,” the Beige Book said “reported that used vehicles have been selling better than new ones.”

Travel and tourism — especially leisure travel — was reported “robust or improved in New York, Dallas, and San Francisco but “Richmond noted that tourism has been adversely affected by severe and damaging coastal storms, while Kansas City characterized the outlook [for tourism] as “grim.”

New York, Philadelphia, Cleveland, Minneapolis, Kansas City, and San all reported “modest increases in manufacturing activity” but Richmond and Chicago both said manufacturing activity had leveled off and activity continued to decline in Atlanta and St. Louis.

The Beige Book blamed tighter credit as affecting the “ability of customers to place new orders” in Richmond.

A majority of districts reported that “the lower-priced segment of the housing market has outperformed the high end” and Boston, Cleveland, Richmond, Atlanta, Chicago, Minneapolis, Kansas City, Dallas, and San Francisco reported increased residential sale activity, whereas sales were “steady or mixed” in New York and Philadelphia Districts. The multifamily housing market deteriorated further in the New York and Chicago. The pick-up in home sale activity “was largely attributed to the homebuyer tax credit” the Beige Book offered, and rising vacancy rates were putting “downward pressure on rents.” Dallas noted multi-family construction was at “historically low levels,” and Kansas City described the sector as “distressed.”

Banks generally reported steady to softer conditions and loan demand “weakened” in New York, Philadelphia, Cleveland, St. Louis, Kansas City, and Dallas.

“New York noted particular weakness in demand for home mortgage loans,” the Beige Book said, but Richmond and St. Louis reported this to be the strongest segment of late.

The Federal Reserve report noted “increasingly tight credit standards” in New York, Richmond, Chicago, St. Louis, Dallas, and San Francisco, largely on commercial loans.”

The Beige Book hinted at higher food prices noting the fall harvest was delayed in many parts of Richmond, Atlanta, Chicago, St. Louis, Minneapolis, and Kansas City Districts due to excessively wet weather and flooding from Tropical Storm Ida and a November storm damaged crops and delayed planting throughout the Richmond district. Corn and soybean prices increased in Chicago, Minneapolis, and Kansas City

While labor conditions remained weak the pace of job cuts generally slowed in Atlanta, Cleveland, and Richmond
The Beige Book also cited “some signs of improvement” in the job market with hiring reported in Boston and reports of service sector expansion in St. Louis.

In contrast to prior reports of pay cuts, the Beige Books said wages were “holding steady” in Boston, Cleveland, Richmond, Chicago, Minneapolis, Kansas City, Dallas, and San Francisco Districts.