Fed's Beige Book suggests recovery gaining traction

The Fed's Beige Book, which is a compilation of anecdotal reports from the twelve Federal Reserve districts, indicated that economic conditions have "improved modestly" since the last report.

Consumer spending has picked up modestly, according to the report, while manufacturing was "said to be, on balance, steady to moderately improving across most of the country, while conditions in the nonfinancial service sector generally strengthened somewhat."

Home sales and construction activity improved across much of the nation, though prices were generally said to be flat or still declining somewhat. However, the level of new residential construction activity was generally characterized as weak.

No big surprise - commercial real estate conditions were widely characterized as weak and, in many cases, deteriorating further. Market conditions were reported to have weakened in virtually all districts, with rising vacancy rates, downward pressure on rents, and little, if any, new development.

The Achilles heel at this point is commercial real estate, which could put added pressures on some banks, but the recovery, for now, is moving ahead at a modest pace. An improvement in the labor market would go along way in putting the recovery on self-sustaining pace.