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Five Things: Fed Reports Housing "In the Doldrums"


Remember these are the same cats that brought us "well contained."


1. Fed Reports Housing "In the Doldrums"

In a worrying sign that the economy may be further deteriorating, or perhaps an optimistic glimmer of hope, we can't really be sure, the Federal Reserve reported Wednesday that housing "remains in the doldrums in most areas."

The official characterization of housing as being "in the doldrums" was delivered in the Federal Reserve' s "Beige Book", the summary of regional business reports from the Fed's 12 regional banks.

Is it better for housing to be "in the doldrums", as opposed to "collapsing at a horrifying pace"? You bet. But remember these are the same cats that brought us "well contained." The Fed has an unnatural affinity for understating the severity of economic conditions.

2. Other Beige Book Lowlights

Consumer Spending:

  • The weakness in discretionary spending was also reflected in relative sales by product type.

  • Sales of luxury goods such as jewelry, electronic equipment, and other big ticket items were reported to be especially slow in the Philadelphia, Richmond, and Chicago Districts.

  • Reports of gains in retail spending were largely limited to grocery stores and pharmacies, although reports from Philadelphia, St. Louis, and Richmond indicated some pickup in sales of apparel, which the latter District attributed in part to severe winter weather.

Nonfinancial Services: (Remember, next to our now virtually non-existent finance-based economy, we are at the very core a services-based economy.)

  • Providers of health-care services reported falling patient volumes, which were attributed in part to a drop in elective procedures in the Richmond, Minneapolis, and San Francisco Districts.

  • Demand continued to fall for professional services such as business consulting and accounting services, legal services, and other professional services in various Districts.

  • Demand for staffing services weakened considerably.

  • Boston reported that outcomes for providers of temporary staffing services were "dismal," with revenue declines in the range of 20 to 50 percent compared with twelve months earlier.

  • Chicago and Dallas also reported sizable declines in activity by staffing firms, and New York noted that activity by a major employment agency has "virtually ground to a halt."

  • Demand for shipping and transportation services fell further.

Manufacturing: (At least one small bright spot, and perhaps an optimistic glimpse at what the future of the economy holds in the long-term.)

  • Manufacturing activity fell on net in all Districts, with very sharp declines recorded for
    some sectors and only partial offsets provided by the few bright spots.

  • Manufacturing of biotechnology products and pharmaceuticals was one bright spot, with Boston reporting sales gains at a double-digit pace for biopharmaceutical firms, Richmond noting continued hiring of temporary staff among life sciences and pharmaceutical companies, and Chicago reporting continued strong demand for pharmaceuticals.

Real Estate and Construction:

  • Residential real estate markets remained in the doldrums in most areas, with only
    scattered, very tentative signs of stabilization reported. (See, I wasn't making that up!)

  • New York cited a sales drop of 60 to 65 percent in Manhattan compared with twelve months earlier.

  • House prices continued to decline, reportedly at double-digit paces in some areas, with little or no signs of a deceleration evident.

Banking and Finance:

  • New York reported that the chiefs of banks receiving Troubled Asset Relief Program funds pooled their resources and bet heavily on a $164,382 Pick 6 carryover at Aqueduct, but were beaten by a nose in the third leg by a first time starter from trainer Gary Contessa's barn.

  • Richmond and Atlanta reported being a little short on their monthly protection money, but indicated they might be able to come up with the rest of it when their cousin gets back from Miami.

  • Dallas wept openly until Cleveland smacked him on the back of the head and demanded he "act like a man!"
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