The Fed’s Beige book is out and it says the speed of the US economy’s contraction is fading amid scattered signs the recession could be nearing an end. So where’s the rally monkey reaction? The DJIA is up about 43 points to 7,963, but given recent reactions, even to much more muted ‘signals’, that’s a fairly dour response. In fact, scratch that, since beginning the post the DJIA has now fully u-turned and is off three points at 7,916.
Errr?
Well, perhaps it’s because amongst the optimistic references, which by the way follow not dissimilar comments by Fed Chairman Ben Bernanke on Tuesday, there was the peppering of Great Depression reminder references like this:
One respondent noted that the current downturn in high-tech is much worse than the high-tech recession in 2001.
So much for innovation coming to the rescue just yet.
Commercial real estate investment activity is being hampered by worsening credit availability “that is very close to a complete absence of lenders.“
Still that credit availability problem.
Milk prices have fallen well below production costs leading to financial losses and culling of dairy cow herds.
Hmmm, will we be giving away free milk to the poor and unemployed soon?
Reports on input costs and output prices indicate mostly steady or falling prices since the last Beige Book.Still deflationary.
Contacts reported that commercial real estate loans are basically nonexistent and maturing loans are being renewed at lower leverage/size, while some are not eligible to be renewed. Contacts have seen a continued slowdown in consumer loan demand with credit card purchase volume falling.
Meredith Whitney’s credit card problem manifesting itself?
Manhattan’s apartment sales market deteriorated markedly in the first quarter: the median sales price for condo re-sales was down 16 percent from a year earlier, while co-op prices fell 22 percent.
Nobody even wants to live in Manhattan.
Revenues at services firms generally decreased, as did average service sector wages and employment.
Although some merchants reported stable wages, average retail wages generally declined and retail employment dropped.
So sticky wages not so sticky after all.
Okay, we know, the above is all cherry-picked. But, in case you missed it, US consumer prices did post their first official decline since 1955 on Wednesday too. Another Fed survey, meanwhile, showed that unused American manufacturing capacity reached a record.
As Bloomberg intuitively notes:
Today’s figures signal deflation, or prolonged price declines, is the bigger danger, and underscores Fed Chairman Ben S. Bernanke’s call for inflation to remain “quite low for some time.”