For immediate release
Release Date: June 24, 2009
For immediate release
Information received since the Federal Open Market Committee met in April suggests that the pace of economic contraction is slowing. Conditions in financial markets have generally improved in recent months. Household spending has shown further signs of stabilizing but remains constrained by ongoing job losses, lower housing wealth, and tight credit. Businesses are cutting back on fixed investment and staffing but appear to be making progress in bringing inventory stocks into better alignment with sales. Although economic activity is likely to remain weak for a time, the Committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability.
The prices of energy and other commodities have risen of late. However, substantial resource slack is likely to dampen cost pressures, and the Committee expects that inflation will remain subdued for some time.
In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. As previously announced, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve will buy up to $300 billion of Treasury securities by autumn. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.Reports from the twelve Federal Reserve District Banks indicate that economic conditions remained weak or deteriorated further during the period from mid-April through May. However, five of the Districts noted that the downward trend is showing signs of moderating. Further, contacts from several Districts said that their expectations have improved, though they do not see a substantial increase in economic activity through the end of the year.
Manufacturing activity declined or remained at a low level across most Districts. However, several Districts also reported that the outlook by manufacturers has improved somewhat. Demand for nonfinancial services contracted across Districts reporting on this segment. Retail spending remained soft as consumers focused on purchasing less expensive necessities and shied away from buying luxury goods. New car purchases remained depressed, with several Districts indicating that tight credit conditions were hampering auto sales. Travel and tourism activity also declined. A number of Districts reported an uptick in home sales, and many said that new home construction appeared to have stabilized at very low levels. Vacancy rates for commercial properties were rising in many parts of the country, while developers are finding financing for new commercial projects increasingly difficult to obtain. Most Districts reported that overall lending activity was stable or weak, but with mixed results across loan categories. Credit conditions remained stringent or tightened further. Energy activity continued to weaken across most Districts, and demand for natural resources remained depressed. Planting and growing conditions varied across Districts as did agricultural input costs.
Labor market conditions continued to be weak across the country, with wages generally remaining flat or falling. Two Districts also mentioned employers' plans to scale back employee benefit programs. The Atlanta, Chicago, and St. Louis Districts reported that some state and local governments faced hiring freezes or outright job cuts. While manufacturing employment levels remained low, some Districts saw signs that job losses may be moderating. With few exceptions, Districts reported that prices at all stages of production were generally flat or falling. The notable exception to the downward pressure on prices was the widely-reported increase in oil prices.
Manufacturing
Manufacturing declined or remained weak in most Districts. Boston, Philadelphia, Cleveland, Chicago, St. Louis, and Minneapolis reported declines in activity, while production remained at very low levels in the San Francisco District. Atlanta and Kansas City indicated that the pace of the decline in manufacturing had moderated or slowed. New York characterized the sector as having stabilized, while Dallas mentioned signs of stabilization. In contrast, Richmond reported a rise in both new orders and shipments.
Philadelphia reported that the primary metals, machinery, and electrical equipment industries remain especially weak, and Cleveland noted that steel shipments continue at depressed levels. Chicago commented that, apart from Asia, export demand was weak. Dallas reported that construction-related manufacturing and the petrochemicals markets remained weak, while San Francisco stated that activity in the wood products industry was depressed and that demand in the metal fabrication industry was extremely weak. Cleveland, Chicago, St. Louis and Dallas all noted weakness in automotive-related industries. In contrast, Boston, Dallas, and San Francisco indicated that high technology industries experienced some increase in activity, and Richmond noted strengthening across a number of industries. Several Districts also reported that the outlook of manufacturers has improved somewhat, though Boston, Cleveland and Kansas City mentioned that capital spending was weak.
Nonfinancial Services
Districts reporting on nonfinancial services indicated that for the most part activity continued to decline. Looking at some specific sectors, providers of health-care services spoke of job cuts and lower patient volumes. Activity continued to weaken or remain soft for providers of professional services such as accounting, architecture, business consulting, and legal services. In contrast, San Francisco reported a substantial pickup in real estate services such as title insurance due to an increase in home refinancing. Activity in IT services varied, with New England firms experiencing declining revenue and business, while demand for IT workers in Richmond and Chicago was reportedly on the rise. High-tech service sales in Kansas City increased moderately, and demand there is expected to strengthen.
Transportation contacts in most Districts say that shipping volume either remained at low levels or continued to decline. Contacts in the Cleveland District generally stated that while shipping volumes remain down across all market segments, the steep drop-off earlier this year has abated. Cargo and container trade in Richmond and Dallas remains at low levels, but contacts noted signs of improvement in import and export activity.
Consumer Spending and Tourism
Consumer spending remained soft as households focused on purchasing less expensive necessities. Reports from New York, Minneapolis, and Dallas indicated a modest rise in sales, while retail purchases in Boston, Philadelphia, Cleveland, Atlanta, Kansas City, and San Francisco were flat or mixed. The other Districts experienced declining sales. Several Districts reported that discounters have seen their sales increase, while purchases of luxury goods continued to weaken. Respondents from Boston, Philadelphia, Cleveland, Atlanta, St. Louis, Kansas City, and Dallas expect soft consumer sales to persist. Purchases of new cars remained depressed across most Districts. However, Chicago saw a small increase in auto sales, which respondents attributed to incentives and promotions. New York, Philadelphia, Atlanta, and Kansas City indicated that tight credit conditions hampered auto sales. Reports from Cleveland, Chicago, Kansas City, and San Francisco indicate that sales of used vehicles are rising.
Travel and tourism activity declined, and vacationers are tending to spend less. Business at Manhattan hotels and Broadway theaters, which had increased modestly in April, fell back in May. Bookings at resorts in the Richmond District are starting to pick up; however, they are weaker than a year ago. In the Atlanta District, promotions and discounting were said to have played a significant role in keeping theme park attendance and cruise bookings stable. Contacts from the San Francisco District said that pronounced declines in hotel occupancy rates, especially luxury hotels, were ongoing, while travel in some parts of the District remained down at double-digit rates from the previous year. However, a report from the Minneapolis District indicated that summer reservations at campgrounds and resorts are strong.
Real Estate and Construction
Although the residential real estate market remains weak, agents in the New York, Philadelphia, Cleveland, Richmond, Chicago, Kansas City, Dallas, and San Francisco Districts reported an uptick in home sales. The reasons cited include seasonal factors, low interest rates, declining house prices, and tax credits for first-time buyers. Much of the sales increase was found in the lower-priced end of the market. New home construction appeared to have stabilized at very low levels in Philadelphia, Cleveland, Atlanta, Chicago, Minneapolis, Dallas, and San Francisco, although Kansas City reported an uptick in construction. Home inventories were trending down in Philadelphia, Richmond, Atlanta, Kansas City, and Dallas. However, Chicago reported that inventories remain elevated.
Commercial real estate markets continued to weaken across all Districts. Vacancy rates for commercial properties were rising in many regions of the Boston, New York, Philadelphia, Richmond, Atlanta, Chicago, Minneapolis, Kansas City, and San Francisco Districts putting downward pressure on rents. Atlanta, Chicago, and St. Louis reported new construction projects being postponed or cancelled, and new construction in the New York, Philadelphia, and Minneapolis Districts dropped substantially. Eight Districts cited difficulty in obtaining financing as one of the primary reasons for delaying or stopping construction of new developments and for limiting sales of existing properties.
Banking and Finance
Most Districts reported that overall lending activity was stable or weak, but with mixed results across loan categories. Demand for commercial and industrial loans fell in New York, Philadelphia, Richmond, and San Francisco. Boston, Chicago, St. Louis, Kansas City, and Dallas singled out commercial real estate as experiencing weakening demand. Boston reported that commercial real estate transactions were increasingly scarce, and Dallas noted that loan renewals in this category required more borrower equity and smaller loan sizes than in the past. Atlanta and Chicago reported limited credit availability for vehicle dealers and other businesses tied to the auto industry. Demand for mortgage refinancing loans was mixed. New York and Cleveland reported strong demand for these loans, while Richmond noted a waning of residential refinancing demand due to rising interest rates. Richmond also reported an uptick in demand for purchase mortgage loans.
Most Districts said that credit conditions remained stringent or tightened further. Reports from Philadelphia and Cleveland expected that credit will remain tight in the near term. The credit quality of loan applicants and existing clients showed deterioration in Philadelphia, Richmond, Cleveland, and Dallas, although Richmond noted that the rate of deterioration has slowed. New York and Cleveland said that delinquencies had increased across numerous loan categories, particularly those tied to real estate. Cleveland and Kansas City reported increases in bank deposits, with the latter attributing the rise to uncertainty about financial markets.
Agriculture and Natural Resources
Planting and growing conditions varied across Districts, with favorable developments in Richmond, Kansas City, and Dallas. However, a drought hindered Oklahoma's wheat crop and livestock production in Southwest Texas. Above-normal rainfall delayed planting of major crops in the Atlanta, Chicago, and St. Louis Districts. Storms in the Minneapolis District destroyed fields and led to higher-than-normal deaths in calving. The Chicago and Kansas City Districts both said that lower cattle and hog prices along with higher feed costs have worsened the income prospect for livestock producers. Input costs in San Francisco, though, have stayed at moderate levels, and sales have continued at a solid pace for most types of agricultural output.
Energy activity continued to weaken across most Districts, and demand for natural resources remained depressed. Coal production and prices fell substantially in the Cleveland District. The number of drilling rigs operating in the Kansas City District is sixty percent below its peak last fall, and working rigs in Texas have fallen fifteen percent over the past six weeks as global demand for oil remains low. However, one production facility in the Gulf of Mexico just opened in May and is expected to make a major contribution to oil and natural gas output once it reaches full production. Wind energy projects expanded in the Kansas City and Minneapolis Districts.
Employment and Wages
Labor market conditions continued to be weak across the country, with wages generally remaining flat or falling. Kansas City, Dallas, and San Francisco reported that businesses were cutting or freezing wages, and Boston cited wage freezes in the retail sector. The Chicago District reported that the downward pressure on wages was abating somewhat there, as firms turned instead to cutting hours or jobs outright to contain labor costs. Firms in the Atlanta and Dallas Districts also reported having to cut hours to reduce costs. In addition, the Boston and San Francisco Districts also mentioned employers' plans to scale back employee benefit programs.
In the service sector, the Boston and Cleveland Districts reported relatively stable retail employment, while the Richmond District reported continuing reductions. The Richmond, Chicago, Minneapolis, Dallas, and San Francisco Districts noted that firms providing professional services, such as accounting, consulting, and legal services, continued to report staff reductions, while the Boston and New York Districts reported weak demand for financial services workers, with ongoing layoffs at large financial firms. The Boston and Richmond Districts also reported reductions in information technology jobs. The Atlanta, Chicago, and St. Louis Districts reported that some state and local governments faced hiring freezes or outright job cuts.
In manufacturing, while employment levels remained low, several Districts saw signs that job losses may be moderating. The New York, Richmond, Atlanta, and Kansas City Districts all reported less severe employment reductions in recent weeks, with some optimism that manufacturing employment levels may soon stabilize. This, however, was balanced by reports of ongoing manufacturing employment losses in the Boston, Cleveland, Chicago, and St. Louis Districts.
Staffing services firms reported some modest signs of recovery, with the Boston, Atlanta, Chicago, and Dallas Districts all reporting some stabilization in activity or a slight improvement in employment trends. The Cleveland and Richmond Districts, however, continued to report that activity among staffing services firms was weak.
Prices
With few exceptions, the District Banks reported that prices at all stages of production were generally flat or falling. Manufacturers in Philadelphia, Cleveland, Atlanta, Chicago, Dallas, and San Francisco said that overall input prices were stable or declining, although in Kansas City those declines were said to be moderating. In contrast, Richmond noted that prices of raw materials had increased at a quicker pace. The notable exception to the downward pressure on input prices was oil. Increases in oil prices were widely reported. However, prices for other energy commodities, like coal and natural gas, remained relatively low. Other exceptions to the prevailing price trend included agricultural items. The Atlanta and Kansas City Districts reported some increases in agricultural prices, with the latter noting that these higher prices were partly driven by global weather concerns. The Chicago and Kansas City Districts also reported higher prices for livestock feed. In construction, the Philadelphia, Kansas City, and Minneapolis Districts reported higher prices for some building supplies, perhaps related to increase in petroleum prices.
Reports from a number of Districts indicated that pricing at retail remains very soft. The Cleveland and Dallas Districts indicated that retail prices were stable, San Francisco said that they were held down by discounting, and Philadelphia noted that steady input costs were holding retail prices in check. In Kansas City, retail prices were declining and expected to soften further. Richmond's retail prices continued to rise, albeit more slowly than in the past.
Aucun commentaire:
Enregistrer un commentaire