Fed Beige Book Reveals a Slowing Economy

The Federal Reserve’s Summary of Commentary on Current Economic Conditions by Federal Reserve District — more commonly called the Beige Book — has shown that the August report read similarly to other months preceding it. Except this time with a bit more evidence of slowing conditions, which is what you might expect if inflation is slowing.

Overall, in three of the 12 districts, economic activity grew slightly. The July version reported on five regions that reported flat to declining activity — which rose to nine in August. In this report, nine districts expected economic activity to remain stable or improve slightly and three expected slight declines. Employment was largely steady although there were “isolated reports” of lowered levels of work, the central bank said.

Commercial construction and real estate showed mixed activity. The Boston region saw largely flat commercial real estate activity with leasing across sectors that were steady and that “exceeded seasonal expectations,” according to the Fed. Rents and vacancy rates also stayed largely the same. The Fed noted that a “growing number of financially distressed office buildings” may eventually face demolition.

In the New York region, CRE was steady on balance. Industrial was unchanged and office in New York City improved slightly. Difficulty in getting credit was constraining new development.

Philadelphia reported “steady construction activity at lower levels.” Institutional, infrastructure and multifamily projects continued to “enter the pipeline.”

Cleveland saw conflicting views. Nonresidential construction saw a slight decrease in demand. There were some offers of concessions by landlords who blamed reduced demand and some who saw increased activity.

Activity in the Richmond district was up slightly with increased demand for retail leasing, though sales were flat, and industrial construction for pad sites and fast food. There has also been a softening of demand for commercial real estate loans.

Atlanta saw mixed results in CRE. Vacancy rates were up in office, industrial, and multifamily. Industrial and multifamily starts were down somewhat, but online retail demand for more brick-and-mortar expansion increased.

Prices and rents as well as CRE activity declined slightly in the Chicago region. But vacancy rates were down somewhat. Demand was down for large industrial spaces but steady for mid-sized spaces.

St. Louis CRE activity differed by property type. More properties were on the market in anticipation of lower interest rates. Office and industrial sectors had lower demand; retail demand was slightly stronger. Federal infrastructure spending boosted construction activity in Missouri.

CRE activity in the Minneapolis region remained soft. Office vacancy rates were up. Some major office properties in the Twin Cities went to auction. Vacancies in retail and industrial stayed low. In some areas, multifamily vacancies rose, but they’re “expected to plateau.”

Kansas City was unusual in that it only reported on residential real estate and not commercial.

For Dallas, multifamily leasing was “solid” while the office sector was largely weak, although there was some increased demand for small space leasing. “A greater share of bankers reported a high level of concern regarding the performance of office real estate loans,” said the Fed.

And San Francisco saw slightly weaker activity in commercial real estate. Industrial and office leasing fell some. Retail leasing was up in Utah. New construction was stable in medical real estate, government, and military. It was down in most CRE sectors, though, and activity shifted to “less costly renovations.”