The following is the full text of the Beige Book released by the Federal Reserve on October 15, 2008 and based on information collected on or before October 6, 2008:
Reports indicated that economic activity weakened in September across all twelve Federal Reserve Districts. Several Districts also noted that their contacts had become more pessimistic about the economic outlook.
Consumer spending decreased in most Districts, with declines reported in retailing, auto sales and tourism. Nearly all Districts commenting on nonfinancial service industries noted reduced activity. Manufacturing slowed in most Districts. Residential real estate markets remained weak, and commercial real estate activity slowed in many Districts. Credit conditions were characterized as being tight across the twelve Districts, with several reporting reduced credit availability for both financial and nonfinancial institutions. District reports on agriculture and natural resources were mostly positive, although adverse weather associated with hurricanes Ike and Gustav negatively affected the South and the Midwest.
Inflationary pressures moderated a bit in September. While several Districts noted continuing pass-through of earlier price increases for metals, food and energy, most indicated that cost pressures had eased. Labor market conditions weakened in most Districts, and wage pressures remained limited. Several Districts reported lower capital spending or reductions in capital spending plans due to the high level of uncertainty about the economic outlook or concerns over the availability of credit.
Consumer Spending and Tourism
Consumer spending was softer in nearly all Districts. Retail sales were reported to have weakened or declined in Philadelphia, Cleveland, Richmond, Atlanta, Chicago, Minneapolis, and Kansas City; Dallas and San Francisco cited weak or sluggish sales; and Boston and New York indicated that sales were mixed and moderately below plan sales, respectively. Several Districts noted a reduction in discretionary spending by consumers and lower sales on big-ticket items. Several also reported increased activity at discount stores as consumers became more price conscious and shifted purchases toward less-expensive brands. Retailers cited these recent sales trends and concerns about credit availability as reasons for a weaker economic outlook, including a slow holiday season. Most Districts reporting on light vehicle sales saw declines, with several Districts pointing to reduced credit availability as a limiting factor for automobile sales. However, Kansas City, St. Louis, and Chicago noted that dealers offering incentive and discount programs had seen some positive effect on sales. Tourism was mixed or weaker for tourist destinations on the East and West coasts, while both Minneapolis and Atlanta indicated that increases in international travelers were helping to offset lower domestic travel.
Hiring and capital spending varied across Districts. Labor market conditions weakened in most Districts. Boston, Chicago and Richmond cited reductions in hiring or hiring plans. Atlanta, Minneapolis, Kansas City, San Francisco and Dallas all noted some weakening in employment. However, the demand for skilled labor remained strong in several Districts, and Kansas City noted market tightness for minimum-wage jobs in leisure and hospitality. Several Districts reported that capital spending decisions were being influenced by economic uncertainty. New York, Chicago, Dallas, and San Francisco noted weaker capital spending. Boston reported capital spending was mixed as firms were cautious about spending resources. Cleveland reported capital spending remained on plan but intentions to increase outlays have declined. Philadelphia indicated concerns over restrictions in access to credit were limiting future capital expenditures for some manufacturers. In contrast, Kansas City and Chicago reported that capital spending for producers of heavy machinery continued to be strong.