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The Honolulu Advertiser
Posted on: Thursday, March 5, 2009

Much of '09 to remain dismal, Fed says

By Jeannine Aversa
Associated Press

WASHINGTON — The businesses on the front lines of the dismal economy say the recession is getting worse in almost every part of the country, and in a bleak new forecast they see no improvement until late this year at the earliest.

A Federal Reserve snapshot of business activity issued yesterday showed widespread declines in production, from the factories of Cleveland to the high-tech firms of Texas and California, in blue-collar construction jobs and at white-collar accounting firms.

The survey, known as the Beige Book, rated the prospects for economic improvement anytime soon as "poor, with a significant pickup not expected before late 2009 or early 2010."

Factories exposed to the housing industry were hardest hit. Construction equipment and materials, such as primary metals, wood products and electrical equipment, saw especially steep drops in production. So did makers of furniture and cars.

The only bright spots were in food, drugs and biotechnology products.

Consumer spending was "very weak," the survey found — no surprise to Mark Steinke, owner of Revival, a Chicago antiques and home decor store, where sales are down 20 percent this year, cutting into Steinke's own paycheck.

"The first thing out of people's mouth is, 'How are you doing? Are you going to survive?' " he said. "Everyone is waiting for another shoe to drop, which is not good."

The survey summarizes information, most of it anecdotal, supplied to the Fed's 12 regional banks. In 10 of those regions, economic activity worsened.

In the two others, Philadelphia and Chicago, the economies merely "remained weak," the survey said.

Hawai'i is in the Fed's regional bank district in San Francisco, along with California, Washington, Oregon, Idaho, Nevada, Utah, Arizona and Alaska.

The report for the San Francisco district said retail sales remained "anemic," with many merchants seeing double-digit sales declines compared with last year. Consumers focused on necessities such as groceries. New cars sales — both domestic and foreign — "remained feeble." Travel activity fell, with Hawai'i seeing sharp declines in visitors and southern California reporting growing cancellations of corporate travel.

The Fed will use the Beige Book as one factor in its discussions when Fed Chairman Ben Bernanke and his colleagues meet March 17 to 18.

At that meeting, the Fed is widely expected to hold interest rates steady, at their record low. The widely watched federal funds rates is already almost as low as it can go, set at a range of zero percent to 0.25 percent.

The Fed also has said it will consider expanding existing relief programs or come up with new ones to battle the worst financial crisis since the 1930s.

Still, most economists believe the recession will drag on at least for most of this year, even after the enactment of President Obama's $787 billion stimulus package.