Property markets remain depressed with few signs of stabilisation.

(NEW YORK) The US Federal Reserve said economic growth slowed in seven of 12 US regions, with retailers ’slightly pessimistic’ about year-end holiday sales.

Weak sales: Reports on retail spending ‘were downbeat in general, with several significant exceptions’, according to the survey.

‘The national economy continued to expand during the survey period of October through mid-November but at a reduced pace,’ the central bank said in its regional business survey, known as the Beige Book for the colour of its cover.

The report followed remarks by Fed vice-chairman Donald Kohn that reinforced forecasts for policy- makers to lower interest rates next month. Mr Kohn noted a ‘deterioration’ in markets that may reduce credit to businesses and consumers.

‘Among districts, seven reported a slower pace of economic activity,’ the report said.

The remaining five Fed banks ‘generally pointed to modest expansion or mixed conditions’, the Beige Book said.

Labour markets ‘remained relatively tight overall but loosened in some areas.’

Wage pressures were ‘unchanged’ while pressures on prices of goods and services ‘remained modest’, excluding food and energy, the Beige Book said. Items linked with energy and agricultural products saw ’significant’ increases in costs, the Fed said.

Federal funds futures reflect a 100 per cent probability the Federal Open Market Committee will cut rates on Dec 11. Traders anticipate a quarter-point reduction in the benchmark rate to 4.25 per cent. Odds of a half-point cut were 6 per cent.

‘Reports on non-financial services generally were consistent with expanding economic activity,’ the Beige Book said. ‘Manufacturing activity was mixed across sub-sectors but appeared to be largely stable.’

Reports on retail spending ‘were downbeat in general, with several significant exceptions’, the survey said. ‘Most districts characterised sales as weak or indicated that they had softened.’

Four regions reported gains in purchases. Most Fed banks reported that retailers expect sales growth ‘to be modest at best in the upcoming holiday season’, the central bank said.

‘Spending data have been maybe a little on the soft side,’ Mr Kohn said on Wednesday in remarks at the Council on Foreign Relations in New York.

Economic figures on Wednesday highlighted the risk that growth will stall this quarter. Sales of previously owned US homes fell 1.2 per cent in October, to an annual rate of 4.97 million, the lowest in at least eight years.

Orders for cars, planes and other durable goods dropped for a third month, the longest slump in three-and-a-half years.

The Beige Book said residential real estate markets ‘remained quite depressed’ with only a few signs of ’stabilisation amidst the ongoing slowdown’. Fed banks’ contacts do not expect ‘a significant pick-up in homebuilding until well into next year’.

The Beige Book’s regional anecdotes are gathered through hundreds of telephone calls, news clippings and personal contact by the staff of the 12 Fed banks, whose districts cover all 50 US states.The November Beige Book was prepared by the San Francisco Fed based on information collected on or before Nov 16. — Bloomberg

Source: Business Times