The U.S. economy showed signs of deceleration in the second half of July and through August as the housing sector continued to struggle after the expiration of a tax credit, the Federal Reserves said in its latest Beige Book report released Wednesday. According to the U.S. Central Bank, the country’s economic growth had eased in the six weeks through the end of August with “widespread signs of a deceleration compared with preceding periods.”
From the Fed: Beige book
“Reports from the twelve Federal Reserve Districts suggested continued growth in national economic activity during the reporting period of mid-July through the end of August, but with widespread signs of a deceleration compared with preceding periods.
Consumer Spending and Tourism
Reports on consumer spending were mixed but suggested a slight increase on balance.
Manufacturing activity expanded further on balance, although the pace of growth appeared to be slower than earlier in the year. Most Districts reported further gains in production activity and sales across a broad spectrum of manufacturing industries. However, New York, Richmond, Atlanta, and Chicago noted that the overall pace of growth slowed, while Philadelphia, Cleveland, and Kansas City reported that demand softened compared with the previous reporting period.
Real Estate and Construction
Activity in residential real estate markets declined further. Most District reports highlighted evidence of very low or declining home sales, which many attributed to a sustained lull following the expiration of the homebuyer tax credit at the end of June. Some Districts, such as New York and Dallas, noted that the expiration of the tax credit created especially weak conditions for lower-priced homes, while others, including Philadelphia and Kansas City, identified the high end of the market as the primary weak spot. Residential construction activity declined in most areas in response to weak demand….Demand for commercial, industrial, and retail space generally remained depressed. Vacancy rates stayed at elevated levels in general and rose further in a few Districts, placing substantial downward pressure on rents.”