Wednesday July 29, 07:11 PM
US economy shows signs of stabilizing: Beige Book
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WASHINGTON (AFP) - The ailing US economy is showing signs it "has begun to stabilize" at low levels after more than a year and a half of recession, the Federal Reserve said in its Beige Book report Wednesday.
The report, to be used by policymakers at next month's Federal Open Market Committee, said the decline is moderating, although many indicators remain weak and prospects for job creation remained grim.
"Reports from the 12 Federal Reserve districts suggest that economic activity continued to be weak going into the summer, but most districts indicated that the pace of decline has moderated since the last report or that activity has begun to stabilize, albeit at a low level," the report said.
Some Fed districts used the words "slow," "subdued," or "weak" to describe activity levels, while others indicated the pace of decline appeared to be moderating. Others pointed to "signs of stabilization."
The Beige Book noted "sluggish retail activity" in most of the nation, while manufacturing showed some gains in parts of the country.
Residential real estate "stayed soft in most districts, although many noted some signs of improvement," the report added, but commercial real estate markets "weakened further in recent months" in most areas.
The banking sector encountered weaker demand for some categories of loans as the economic slump persisted.
As to job prospects, the Fed noted that conditions remained difficult, highlighting fears that weak hiring could dampen recovery prospects.
"Most districts indicated that labor markets were extremely soft, with minimal wage pressures, and cited the use of various methods of reducing compensation in addition to, or instead of, freezing or cutting wages," the report said.
The US economy has been in recession since December 2007, according to the economic panel accepted as the arbiter of business cycles.
The economy suffered a 5.5 percent pace of decline in the first quarter, on the heels of a 6.3 percent slide in the fourth quarter of 2008. But many forecasters are expecting growth to resume in the second half of 2009.
The Fed this month raised its outlook for 2009 and 2010 economic output, projecting a rebound in the second half of 2009 that would leave the contraction for the year at between 1.0 and 1.5 percent.
For 2010, the new Fed outlook saw growth in a range of 2.1 to 3.3 percent, slightly better than its forecast from April.
The government's first estimate for gross domestic product in the second quarter to June 30 is to be released Friday. The consensus forecast by private economists is for a 1.5 percent rate of decline.
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