The US Federal Reserve meets early next month and already we know what we can expect from the meeting.

No change on rates and no change in the use of the phrase "extended period'' in the post meeting statement to refer to how long the Fed sees rates remaining at their current record lows.

Despite signs in Europe and China (See separate story) that the worst fears for slump and slide are not going to be met, the US economy continues to slide, both sideways and downwards.

There's lots of talk the current second quarter earnings season is showing business is doing better than anyone expected, but they are all ignoring the basis for the comparison, the second quarter of 2009 when the US economy was still gripped by intense recessionary fears.

Analysts point out how well companies are doing profit wise and especially revenues.

But earnings were weak in the second quarter of 2009, and revenues fell by an average 14% on the same period of 2008.

So far this reporting season, revenues are up around 9% quarter on quarter. So revenue growth has failed to reach 2008 levels, which is when the economy was in recession.

The Beige Book for the next Fed meeting was issued this week (it's a look at the economy in the 12 reporting districts of the Fed across the US) and it wasn't optimistic at all.

In fact it was very guarded to pessimistic.

"Economic activity has continued to increase, on balance, since the previous survey, although the Cleveland and Kansas City Districts reported that the level of economic activity generally held steady.

"Among those Districts reporting improvements in economic activity, a number of them noted that the increases were modest, and two Districts, Atlanta and Chicago, said that the pace of economic activity had slowed recently.

"Manufacturing activity continued to expand in most Districts, although several Districts reported that activity had slowed or leveled off during the reporting period."

"Fed manufacturing reports from several districts, including Texas and the Midwest, show the sector slowing noticeably in recent weeks.

"That's shown in a fall in durable goods orders in June, which the market forecast to be higher. It was the second monthly fall in durable goods orders (big ticket items ordered by business).

"Activity in residential real estate markets was sluggish in most Districts after the expiration of the April 30 deadline for the homebuyer tax credit. Commercial real estate markets, especially construction, remained weak."

And figures out this week from the US Census Bureau explain why the housing sector is depressed and why US consumers are cutting spending and credit.

The Bureau said that almost 19 million homes in the US were empty during the June quarter as surging foreclosures helped push ownership to the lowest level in a decade.

The Bureau said the number of vacant properties, including foreclosures, residences for sale and vacation homes, rose from 18.6 million in the same quarter of 2009.

The ownership rate, meaning households that own their own residence, was 66.9%, the lowest since 1999, down from 67.1% in the March quarter.

It hit a high of 69.2% in the final months of 2004.

The Census Bureau includes foreclosures and also tracks vacant properties under renovation or tied up in legal proceedings. There were 3.7 million empty homes in the second quarter, up from 3.5 million in the year earlier period.

There were 2 million empty homes for sale in the second quarter, up from 1.9 million a year earlier.

They would be mostly foreclosed homes, vacant and awaiting a buyers.

There were a further 1.7 million homes that were unwanted or unsaleable and not for sale.

A record 4.6% of US mortgages were in foreclosure in the first quarter, and the US Mortgage Bankers Association has estimated that the combined share of foreclosures and home loan delinquencies was 14% in the March quarter, or about one in every seven US mortgages.

This is why the figures on new US home sales and housing starts, as well as the latest case Schiller home Price Index, are not being well understood by investors, or analysts for that matter.

This week we saw a positive reaction to June new home sales, which were said to be up 24% from May's revised (down) figure.

June's starts were 33,000 (annual), which was the initial estimate for May. But May was cut to a record low of 267,000 (which means that if you were a punter, you'd bet on the June first estimate being cut as well).

Canadian economist, Dave Rosenberg explains:

"April new home sales were revised DOWN to a 422k annual rate from 504k when the data for the month were first released.

"You know what that means? It means that the homebuyer tax credit was even a bigger dud than we thought it was previously. No bang for the buck from these spending gimmicks.

"May new home sales were revised DOWN to 267k units from 300k. That sure puts a 23.6% "jump" to 330k into perspective, doesn't it? It's called bear market math.

"At 330k in June, this goes down as the second worst month on record (data back to January 1963). And in per capita terms it is far worse than that considering the population has expanded 63% since then.

"Now, if we take the original unrevised number for April, the unrevised May data-point, and the June consensus estimate of 310k, then the average of the past three months would have been 371k. But post-revisions and with the actual June print, sales have averaged 340k at an annual rate.

"We are actually left with a weaker three-month profile of home sales after the release of the (June) data, not the opposite. Also, it took a median of 12.4 months for the builders to locate a buyer upon completion - a record for June.

"The unsold inventory number was also revised sharply higher in May and because of that, the backlog looks so much better now - from 9.6 months' supply to 7.6 months'. Even so, a well-balanced market, as any real estate agent will tell you, is 5-6 months' supply.

"Maybe this is why the average sales price was cut 9.8% month-on-month in the third steepest month ever in terms of discounting. At $US242,900 for an average price of a new home sold, this represented the lowest number since October 2003 and off 26% from the 2007 peak."

And while all of this has been happening, US households paid down a record $US258 billion of consumer debt over the past year and homebuyers are refinancing and paying back home loans faster than ever, thereby cash back in to their mortgages by restoring or rebuilding their equity.

And, finally, there was an interesting column in the New York during the week which summed up the damage of all this bad news, especially jobless and housing, has been doing to American families.

Columnist Bob Herbert wrote: "The pain coursing through American families is all too real and no one seems to know what to do about it.

"A rigorous new analysis for the Rockefeller Foundation shows that Americans are more economically insecure now than they have been in a quarter of a century, and the trend lines suggest that things will only get worse.

"The team's findings were grim. Simply stated, more and more families are facing utter economic devastation: completely out of money, with their jobs, savings and retirement funds gone, and nowhere to turn for the next dollar.

"More than 14 million people are out of work and many more are either underemployed or so discouraged they've just stopped looking.

"Big corporations, sitting on fat profits even as the economy continues to struggle, have made it clear that they are not interested in putting a lot more people back to work any time soon."

According to current estimates, at the end of the June quarter, US companies were sitting on nearly $US1 trillion of cash, and refusing to do anything with it.

US banks are not lending, the Government-controlled Freddie Mac and Fannie Mae are the only groups financing the (depressed) housing sector.

No wonder the US Conference Board's survey of consumer sentiment showed another big fall this week for July.

If the US economy continues slowing and tips over into a new slump blame the imploding housing sector (despite the price rises) and the devastated financial state of American consumers and families.