In June and the first half of July, shoppers restrained spending and factory production eased, slowing economic growth, according to the Federal Reserve’s Beige Book survey released today in Washington. The Fed’s survey covers twelve regions, eight of which showed moderating growth in June, as compared to the four regions showing a slow down in the last survey.
On July 13, Fed Chairman Ben Bernanke addressed Congress on the importance of maintaining the record monetary stimulus in order to fuel the economy. He made it clear that the Fed might consider buying more government bonds should recovery efforts stall.
Auto sales and manufacturing both slowed during the period covered by the Fed’s latest survey, as did consumer spending, which accounts for roughly 70% of the economy. Earlier today, the Commerce Department reported that durable goods orders fell 2.1% in June, reflecting waning confidence in the recovery at the end of the second quarter. On July 20, the government will release a report expected to show that economic growth during the second quarter was the slowest its been in a year, with high fuel prices slowing down other consumer spending.
According to the Fed’s survey, the housing market was weak and loan demand was more mixed than in the period covered by the last Beige Book. In fact, lending by U.S. banks showed almost no growth between early January and July 13, increasing from $6.77 trillion to $6.78 trillion. Food and energy prices were up year-over-year, as was inflation, up 3.6% in the last twelve months.
Bernanke did present Congress with some good news: the expectation that growth will accelerate above 3% during the second half of 2011 as oil and gas prices decline. However, most of that growth won’t be coming from the job market, with unemployment expected to decline less than by 0.3% to 0.7% over the next two quarters.