The following is the full text of the Beige Book released by the Federal Reserve on July 23, 2008 and based on information collected on or before February 23, 2009:
Reports from the twelve Federal Reserve Districts suggest that national economic conditions deteriorated further during the reporting period of January through late February. Ten of the twelve reports indicated weaker conditions or declines in economic activity; the exceptions were Philadelphia and Chicago, which reported that their regional economies "remained weak." The deterioration was broad based, with only a few sectors such as basic food production and pharmaceuticals appearing to be exceptions. Looking ahead, contacts from various Districts rate the prospects for near-term improvement in economic conditions as poor, with a significant pickup not expected before late 2009 or early 2010.
Consumer spending remained sluggish on net, although many Districts noted some improvement in January and February compared with a dismal holiday spending season. Travel and tourist activity fell noticeably in key destinations, as did activity for a wide range of nonfinancial services, with substantial job cuts noted in many instances. Reports on manufacturing activity suggested steep declines in activity in some sectors and pronounced declines overall. Conditions weakened somewhat for agricultural producers and substantially for extractors of natural resources, with reduced global demand cited as an underlying determinant in both cases. Markets for residential real estate remained largely stagnant, with only minimal and scattered signs of stabilization emerging in some areas, while demand for commercial real estate weakened significantly. Reports from banks and other financial institutions indicated further drops in business loan demand, a slight deterioration in credit quality for businesses and households, and continued tight credit availability.
Upward price pressures continued to ease across a broad spectrum of final goods and services. This was largely associated with lower prices for energy and assorted raw materials compared with earlier periods, but also with weak final demand more generally, which spurred price discounting for items other than energy and food. With rising layoffs and hiring freezes, unemployment has risen in all areas, reducing or eliminating upward wage pressures. A number of reports pointed to outright reductions in hourly compensation costs, through wage reductions and reduction or elimination of some employment benefits.
Consumer Spending and Tourism
Consumer spending remained very weak on balance, albeit with slight firming noted by many Districts, particularly compared with holiday-season sales that were very disappointing. About half of the Districts reported that consumer demand was softer than during recent reporting periods or fell significantly below levels twelve months earlier. However, compared with the preceding reporting period that included the holiday season, retail spending was described as "mixed" in the Boston and Richmond Districts, "nearly steady" in Philadelphia, and slightly improved in Cleveland and Dallas, while New York reported a reduced rate of decline compared with the "steep" pace in December. But San Francisco characterized retail sales as "anemic" and pointed to double-digit sales declines relative to twelve months earlier for many retail outlets. As reported by Richmond, Chicago, and San Francisco, discount chains fared much better than traditional department stores and specialized retailers, recording sales gains in many cases as consumers continued to switch away from discretionary spending and luxury items and toward basic necessities.
The weakness in discretionary spending was also reflected in relative sales by product type. Sales of luxury goods such as jewelry, electronic equipment, and other big ticket items were reported to be especially slow in the Philadelphia, Richmond, and Chicago Districts. Demand for furniture, appliances, and other durable household items remained quite depressed, according to Kansas City and San Francisco. Sales of new automobiles and light trucks remained exceptionally sluggish, with Philadelphia, Richmond, and Kansas City reporting further declines from an already slow pace of sales. Used vehicles fared better in general, with Kansas City and San Francisco noting that they were selling well and Cleveland and Chicago reporting improvement over the previous period. Reports of gains in retail spending were largely limited to grocery stores and pharmacies, although reports from Philadelphia, St. Louis, and Richmond indicated some pickup in sales of apparel, which the latter District attributed in part to severe winter weather.
Travel and tourist activity continued to fall in most areas, as households reduced their vacation travel and corporate travel spending was scaled back. Tourist visits and spending were reported to be slower than in the previous reporting period or down from twelve months earlier for major tourist destinations in the Richmond, Atlanta, Minneapolis, New York, and San Francisco Districts, with the declines in the latter two characterized as "substantial" and "sharp," respectively. Airline traffic fell in the Kansas City, Dallas, and San Francisco Districts. Business at restaurants dropped substantially in some areas, notably in the Kansas City and San Francisco Districts, with extensive layoffs and restaurant closures reported in the latter.