K.C., Omaha economies stabilizing

The Federal Reserve said in its latest Beige Book report Wednesday that the economy is slowly stabilizing, especially in four regions, including the Kansas City region, which includes Omaha.

The report, a snapshot of economic conditions that the Fed issues eight times a year, said that in most of the 12 regions, the recession was easing or economic activity had begun to slowly stabilize, bolstering hopes of a recovery this year.

Along with the Kansas City region, the other three regions showing signs of stabilization were New York, Cleveland and San Francisco. Two regions — Chicago and St. Louis — reported that the pace of decline appeared to be “moderating.”

Economic activity in five regions was described as “slow,” “subdued,” or weak. Those areas: Boston, Philadelphia, Richmond, Atlanta and Dallas.

Minneapolis was the only region indicating that the downward slide in economic activity had worsened.

The Beige Book reports are anecdotal and don't contain statistics. Information is gathered from sample businesses representing key industries in each region.

A Nebraska economist who contributed to an earlier report on the state's economy cautioned that despite the apparent progress, recovery from the longest recession since World War II will probably be slow.

“We are along the bottom, but we're not expecting any dramatic upswing in the near future,” said Ken Lemke, an economist for the Nebraska Public Power District.

Lemke contributed to a June report published by the University of Nebraska-Lincoln Bureau of Business Research that said consumer spending, home and retail sales, and industrial production suggested that the economy might be nearing a turning point. The report also said the recession could end later this year.

Overall, Nebraska has fared better during the recession than many other parts of the country, in part because agriculture has been a stabilizing force, Lemke said.

Many economists predict that second-quarter results to be released Friday will show that the U.S. economy contracted at a rate of 1.5 percent from April through June. That would be a big improvement from the annualized 5.5 percent drop in the first three months of this year.

Some analysts also believe that the economy could start growing as soon as the current quarter.

The UNL Bureau of Business Research, which releases a report on the local economy twice a year, said in June that the loss of wealth in the stock market and the housing market, as well as continued job losses, had diminished people's ability and desire to spend. That will prevent a strong bounce out of recession, the researchers said.

Joining Lemke in conducting the study were economists John Austin, Bruce Johnson and Eric Thompson of UNL; Chris Decker and Keith Turner of the University of Nebraska at Omaha; Tom Doering of the Nebraska Department of Economic Development; Shannon Ramaeker of the Nebraska Department of Labor; Franz Schwarz of the Nebraska Department of Revenue; and Scott Strain of the Greater Omaha Chamber of Commerce.

Wednesday's Fed report described retail activity as “sluggish” in all regions, with shoppers continuing to be price-conscious. The Kansas City region, however, was one of three reporting “modest sales increases or less negative sales results.”

Jim Otto, president of the Nebraska Retail Federation, said he had no information on whether people had resumed purchasing items beyond the necessities.

Meanwhile, auto sales were mixed across the country, while travel and tourism was down in a majority of the regions.

Loy Todd, president of the Nebraska New Car and Truck Dealers Association, said his organization doesn't track sales, but anecdotal information from dealers was encouraging.

They recently have reported increased traffic at vehicle dealerships, Todd said. The activity is partly due to the federal “cash for clunkers,” Todd said.

But people who had delayed buying a new car even though they needed one might finally be coming to the table, he said.

“Cars wear out.”

The Fed reports also showed manufacturing activity had “some improvement” in the Richmond, Chicago and Kansas City regions.

Residential real estate remained “soft” in most Fed regions, although “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. And the weak job market meant companies were more interested in cutting wages than in boosting them. Those observations were consistent with the Fed's prediction that inflation will stay low this year.

This report includes material from the Associated Press.

Contact the writer:

444-1117, joe.ruff@owh.com

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