TD Economics

July 28, 2010

Data Release: July’s Beige Book in a mid-year lull

• The Federal Reserve’s Beige Book signaled a slowing pace of economic recovery across U.S. districts in
June and early July.
• Ten of twelve districts reported an increase in economic activity, down from the June report in which all
regions reported gains. Of the regions reporting increased activity, several “noted that the increases were
modest.”
• Manufacturing activity continued to improve, but at a slower pace on balance. This has already become
evident in the ISM manufacturing index. Firms in several districts anticipate that demand will continue to
improve in the months ahead.
• Conditions in residential real estate weakened in the wake of the expired homebuyer’s tax credit. Several
districts reported an anticipated slowdown in home sales and little in the way of new construction intentions.
Commercial and industrial real estate remained weak across all districts.
• Demand for loans remained relatively weak across districts and lending categories, while lending standards
also remained “restrictive”.
• Labor markets continued to improve modestly across districts, while prices “held steady” and few districts
reported input cost increases.

Key Implications

• The qualitative assessment of economic conditions across the United States is attune with the anticipated
slowdown in the pace of economic growth in the second quarter. Following average annualized growth of
3.5% over the first three quarters of recovery, real GDP growth likely slowed to around 2.0% in the second
quarter of the year.
• Moreover, similar to the monthly data, activity appears to have slowed late in the quarter, as stimulus
measures unwound, setting the stage for a slower growth trend in the second half of this year.
• The Beige Book continues to report a subdued outlook for wage and price pressures. A slowdown in the
pace of growth means that excess slack will remain in the economy for a prolonged period of time and
supports the Fed’s rationale to leave interest rates low “for an extended period”.

James Marple, Senior Economist

416-982-2557

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