The “modest” US economic recovery is slowing in some parts of the country, the US Federal Reserve said in its latest Beige Book report published on Wednesday.
Concerns about the strength of economic recovery in the US weighed on Asian stocks yesterday, with Tokyo’s Nikkei closing down 0.59 percent, or 57.25 points, at 9,696.02.
Sydney ended down 0.13 percent, or 5.8 points, at 4,524.1, while Hong Kong was flat at 21,093.82.
Asian markets yesterday were following a 0.38 percent drop on the Wall Street overnight.
“Economic activity has continued to increase, on balance, since the previous survey” early last month, the Fed said, while noting significant headwinds. “Among those districts reporting improvements in economic activity, a number of them noted that the increases were modest, and two districts, Atlanta and Chicago, said that the pace of economic activity had slowed recently.”
The Fed’s survey is likely to fuel concerns — already fanned by high unemployment and weak business confidence — that the world’s biggest economy is slipping toward the second part of a double-dip recession.
“The picture is more pessimistic than in the last survey, when all 12 Fed districts reported growth,” said Nigel Gault, chief US economist with IHS Global Insight. “The report underlines that the economy has lost momentum at the mid-point of the year, but doesn’t yet suggest a tip back into recession.”
The downbeat assessment was compounded by news that orders for big-ticket items suffered the biggest drop in almost a year last month.
New orders for “manufactured durable goods” — such as planes, cars, refrigerators and computers — fell by US$2 billion, or 1 percent, from the previous month, the US Commerce Department said. Analysts had expected a rise of 1.1 percent.
The Fed also reported bad news from sectors that have been key pillars of the US economy, including the all-important jobs market.
Noting that the “labor market conditions improved gradually in several districts,” the Fed said five regions saw an increase in demand for temporary labor.
In five other regions the “labor markets improved, albeit modestly in some cases.”
There was also little sign of respite in the struggling housing market as government stimulus measures evaporated.
“Activity in residential real estate markets was sluggish in most districts after the expiration of the April 30 deadline for the homebuyer tax credit,” the Beige Book said.
“Some sectors like the real estate activity are still subject to serious concerns,” said Thomas Julien, an economist with the investment firm Natixis.
Moreover, Americans do not appear to be flooding back to the shops or buying online.
“Reports on retail sales during the early summer months were generally positive, although in most districts, the increases were modest,” the Fed report said.
The report will be used at the next meeting of the central bank’s interest rate-setting body, the Federal Open Market Committee (FOMC), on Aug. 10.
Few experts expect the report to shift the Federal Open Market Committee’s promise of keeping interest rates at historic lows in a bid to stimulate growth.
“This report is consistent with the main message from the FOMC minutes and testimony by [Federal Reserve] Chairman [Ben] Bernanke to Congress that a moderate recovery remains in place, but activity slowed somewhat at the end of the second quarter,” Michael Gapen at Barclays Capital said.
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