Thursday, April 16, 2009

US economy continues to contract

US economic activity weakened in March, but there were some signs of stabilisation, the Federal Reserve has said in its influential Beige Book.

The report, used to set US interest rates, said "overall economic activity contracted further or remained weak".

But a number of districts had noted a "moderation in the pace of decline", while others were "stabilising".

The report comes a day after President Barack Obama and Fed chairman Ben Bernanke said the recession was easing.

The Beige Book is compiled eight times a year and is based on reports and comments from businesses across the US.

The last report was released at the beginning of March.

'Slight improvement'

Despite some signs of improvement, this report painted a bleak picture of current US economic activity.
“ Several reports noted that the pace of decline had slowed or that factory activity had stabilised ”
The Federal Reserve's Beige Book

"Manufacturing activity weakened across a broad range of industries in most districts, with only a few exceptions," it said.

"Non financial service activity continue to contract across districts," it added.

The report also said that retail spending remained slow, but did comment that "some districts noted a slight improvement in sales compared with the previous reporting period".

The property market also continued to suffer, but there were signs that interest from buyers was returning.

"Home prices and construction were still falling in most areas, but better-than-expected buyer traffic led to scattered pick-up in sales in a number of districts," the report said.

Downward pressure on prices was also reported.

Indeed, official figures from the US Labor Department on Wednesday confirmed that US consumer prices fell by 0.1% in March.

The fall meant consumer prices were down 0.4% from a year ago, the first annual decline since 1955.

'Economic progress'

The book also noted that "manufacturing activity continued to decline in most districts and across a wide range of industries".
“ We're clearly still in a deep recession but there are signs that things are looking a little bit brighter ”
Michelle Meyer, Barclays Capital

The Federal Reserve confirmed earlier on Wednesday that industrial production fell by 1.5% in March.

However, "several reports noted that the pace of decline had slowed or that factory activity had stabilised", the book said.

US factories have been running down inventories and cutting back on production as demand for manufactured goods has slumped during the recession.

The book is published at a time when some commentators believe the recession may be easing.

"Although conditions are still weak right now, there are signs that there is stabilisation in certain sectors," said Michelle Meyer at Barclays Capital.

"We're clearly still in a deep recession, but there are signs that things are looking a little bit brighter," she added.

On Tuesday, Mr Obama said that there were "signs of economic progress" in a speech at Georgetown University.

He did, however, say that 2009 would be a hard year for the US economy, when there would be more job losses, more repossessions and "more pain".

Mr Bernanke, talking to students at Moorehouse University in Atlanta, also on Tuesday, spoke of "tentative signs" that the rate of contraction of the US economy was slowing down.

Story from BBC NEWS:

Published: 2009/04/15 21:20:30 GMT

No comments: