Fed: Economy shows signs of stabilizing in some regions

The economy finally is beginning to show signs of stabilizing in parts of the country, bolstering hopes for a broader recovery this year.

The Federal Reserve's "Beige Book" report on economic conditions issued Wednesday showed that the economy remains fragile. But it said that in many of the 12 Federal Reserve Bank districts, the recession is easing and economic activity had begun to stabilize in late June through mid-July.

Four Fed regions — New York, Cleveland, Kansas City and San Francisco — pointed to "signs of stabilization," the survey said. Two regions — Chicago and St. Louis — reported that the pace of economic declined appeared to be "moderating."

Five other regions — Boston, Philadelphia, Richmond, Atlanta and Dallas — described activity as "slow," "subdued" or "weak." Only one region — Minneapolis — indicated that its downward slide in economic activity had worsened.

Combined, the assessments of businesses on the front lines of the economy appeared to be brighter than those provided for the last Fed report, in mid-June.

The observations in the Fed survey are consistent with an assessment last week by Fed Chairman Ben Bernanke: that the economy should start growing in the second half this year, ending the longest recession since World War II.

Many analysts believe the recession, which began in December 2007, eased considerably in the April-to-June quarter. They're forecasting that the economy shrank at a 1.5% annual rate in the second quarter.

That would mark a big improvement from the 5.5% drop in the first three months this year. The government will release second-quarter GDP results Friday. Many economists also believe the U.S. could start growing as soon as the current quarter.

The Beige Book's findings will figure into discussions when Bernanke and his colleagues meet next on Aug. 11-12. The Fed is expected to keep a key bank lending rate at a record low near zero to help nurture a recovery. Economists say the Fed is likely to hold rates at record low levels the rest of this year.

Most Fed regions reported "sluggish" retail activity, with shoppers continuing to be price-conscious.

But the Fed regions of Boston, Kansas City and San Francisco reported either "modest sales increases or less negative sales results," the Fed said. The Philadelphia, Atlanta, St. Louis, New York and Dallas regions reported "flat or mixed sales." The remaining Fed regions described them as "soft."

Auto sales were mixed across the country, while travel and tourism was down in most regions.

In the factory sector, reports overall suggested that activity "remained subdued" but "slightly more positive" than in the previous survey.

Manufacturing activity showed "some improvement" in the Richmond, Chicago and Kansas City regions. The regions of St. Louis and Dallas said the rate of decline in factory activity is moderating. The Philadelphia and Minneapolis regions saw manufacturing activity drop, while the rest of the regions described activity at "low levels."

Residential real estate remained "soft" in most Fed regions, though "many noted some signs of improvement." By contrast, commercial real-estate activity weakened further.

Meanwhile, competitive pressures were restraining companies' ability to jack up prices, according to the report. And the weak job market meant companies were more interested in cutting wages than in boosting them. Those observations are consistent with the Fed's prediction that inflation will stay low this year.

Speaking at a health care forum in Raleigh, N.C. on Wednesday, President Obama said, "We may be seeing the beginning of the end of the recession."

However, Obama said the positive developments are little comfort to people still losing their jobs and he cautioned that "the tough times aren't over."