Economy Watch: Beige Book Calls Economy Modest (and Moderate) Again

The latest edition of the Federal Reserve’s Beige Book recently came out, and it seemed to say that the economy is still plodding along.

The latest edition of the Federal Reserve’s Beige Book came out on Wednesday, and it seemed to say that the economy is still plodding along. Or to use the central bank’s language: “Reports from the 12 Federal Reserve Districts suggest that national economic activity continued to expand at a modest to moderate pace during the reporting period of early July through late August.”

Overall, according to the book, consumer spending rose in most districts, reflecting strong demand for cars and housing-related goods. Activity in the travel and tourism sector expanded in most areas, while demand for nonfinancial services—including professional and transportation services—increased slightly. Manufacturing activity expanded “modestly.”

In residential real estate, the Fed reported that rising home prices and mortgage interest rates may have spurred a pickup in recent market activity, as many “fence sitters” were prompted to commit to purchases. Also, limited inventories of desirable properties contributed to upward price pressures. Single-family home construction was strong in the Minneapolis and Dallas districts, while Chicago reported that a number of builders are planning new developments for later this year.

In commercial real estate, demand increased. Office vacancy rates and other indicators in markets for office space improved “modestly” in the major metropolitan markets in the New York, Richmond, and St. Louis districts, the book noted. Rents for Class B office space in Manhattan have risen more than 10 percent over the past 12 months, and demand for CRE showed “strong growth” in the Dallas District but “moderate growth” in the Minneapolis District.

U.S. car sales skyrocket

On Wednesday, Autodata Corp. reported strong sales for carmakers in August. Automakers sold 1.5 million vehicles last month, a 17 percent improvement compared with the same month in 2012. In fact, monthly sales haven’t been that high since 2007, before the recession put a dint in the market.

Both domestic and foreign carmakers shared the bounty of higher sales. Ford, for instance, is moving a lot of Fusion sedans and Explorer and Escape crossovers. GM’s Chevrolet division is selling a lot of Cruze and redesigned Impala vehicles, while Chrysler’s Jeeps and Fiat 500Ls are doing very well indeed.

Wall Street seemed to regain some of its poise on Wednesday, with the Dow Jones Industrial Average up 96.91 points, or 0.65 percent. The S&P 500 gained 0.81 percent and the Nasdaq advanced 0.58 percent.