Fed’s Latest Survey Finds New Signs of Economic Recovery : Recession: But the overall picture remains mixed, with activity still ‘sluggish’ on the West Coast and in the Northeast.
The nation’s economy is showing further signs of reviving, according to the latest Federal Reserve periodic survey of national economic conditions. But the central bank report was guarded in its assessment of business activity, which it said stayed “sluggish” on the West Coast and in the Northeast.
Manufacturing led the “uneven” growth in the U.S. economy, the survey reported, as orders for machinery and electrical equipment increased and motor vehicle and steel production rose throughout the nation. The Fed also pointed to widespread growth in home building and retail sales as evidence of a modest economic recovery.
But the Fed survey, known as the “beige book,” remained muted in its assessment of the health of the economy.
Based on information collected from Fed banks throughout the country before April 27, the survey said that the West Coast and Northeast continue to lag with “sluggish economic activity.” Several regions suffered “continued declines” in commercial construction, energy extraction and defense manufacturing, the Fed report said, and demand remains “weak” for consumer and business loans other than those used for home mortgages.
The Federal Open Market Committee, made up of the seven Fed board members and the district bank presidents, will discuss the report at its May 19 review of current monetary policy.
The survey is also closely watched by businesses looking for signs of recovery in an economy that has been largely stagnant for most of the last 1 1/2 years. And it will be read for signs of future Fed action. The economy grew at a 2% annual rate during the first three months of the year, and some analysts believe that the Fed will cut interest rates further to guarantee that the recovery does not falter like it did last year.
The picture drawn by the survey is decidedly mixed overall.
The district banks in Richmond, Chicago, Atlanta and Cleveland reported “noticeable improvement” in their local economies, the Fed said.
The Dallas, St. Louis, Kansas City, Mo., and Minneapolis district banks reported moderate economic expansion.
However, San Francisco, New York, Boston and Philadelphia district banks reported continued sluggishness, the survey said.
Nationwide, the energy sector was a particular weak point. In the Midwest, coal production was running about 6% below the level of the year-ago period. Low oil and natural gas prices have depressed exploration and production, and the drilling-rig count continues to fall, the Fed said. “Further layoffs are likely over the next few months” in that industry, the central bank added. In Texas, oil and gas industry declines offset other gains in manufacturing.
On the other hand, service industries that have played a big role in the slowdown of the economy recently showed signs of revival. Tourism and convention activity picked up in several areas, and the Southwest region reported “strong” demand for lawyers, accountants and consultants.
The West Coast and New England were hit by cutbacks in military procurement spending.
The Economy: A Regional Outlook
1. Guarded optimism that recovery is imminent. Retail results were mixed; manufacturers still not as confident as retailers. Cautiousness toward hiring and inventory management.
2. Mixed reports but with a more positive tone about the outlook. Home builders note increased buyer interest; unemployment rates fell in March; retail sales varied widely.
3. Economic conditions appeared steady overall, but with some signs of improvement. Manufacturers had second month of growth; home sales were picking up; retailing remained weak.
4. Retailers, manufacturers and builders are more optimistic that the recovery will be sustained. But retailers are not building inventories; housing sales increasing.
5. Economy is picking up steam. Sales of big ticket items rose; manufacturing also posted strong gains; loan demand rose; home sales strengthened; farmers helped by good weather.
6. Feeling about economy is upbeat. Auto sales up some; manufacturing orders and production increase; home sales improving. But loan demand is spotty; prices and wages are steady.
7. Economy continues to expand. Retail sales moved higher, although Chicago flood meant lost sales; auto dealers mostly positive; manufacturers say production increasing.
8. Region continues to recover. Some manufacturers hiring and expanding; house building and loan demand up. Crop plantings increased.
9. Signs of modest recovery emerge. Job market strengthened. Consumer spending improving with retail sales; auto and truck sales picking up; home sales picking up.
10. Economy is growing slowly. Retail sales improve, housing starts remain strong and auto sales inch upward. Energy sector remains depressed, and higher cattle prices have hurt farmers.
11. Economic activity is increasing moderately. Growth has been broad-based with the exception of the energy and farm sectors. Prices are stable.
12. Economy is improving very slowly, though weakness remains in California. Retail and auto sales soft in several markets and layoffs continue in defense-related manufacturing. Non-residential construction remains weak. Wage and price increases are modest.
Source: Federal Reserve Board
