California Woes Are Hindering U.S. Recovery : Economy: ‘Beige book’ report finds moderate growth in most of nation, but Southland is called the weakest region.
The recovery is proceeding at a modest pace in most areas of the country, but California’s economy continues to lag behind the rest of the nation, according to a report released Wednesday by the Federal Reserve Board.
The Fed gave the most optimistic overall assessment of the nation’s economic activity in months, noting that “economic activity continued to expand at a moderate pace through the end of November” and that “reports were generally more optimistic than those of this summer.”
The description seemed more optimistic than the restrained “slow to moderate” characterization used in Fed reports since June. However, Fed officials also cautioned against interpreting the results too optimistically.
“I don’t encourage people to read too much into the tea leaves from one report to another,” said Brian Cromwell, an economist at the Federal Reserve Bank of San Francisco.
The Fed’s report, known as the “beige book” review of economic conditions, also notes that conditions in California and the Northeast were “more mixed” and that reports from California showed “particular weakness.”
The report’s findings indicate that California stands out as the nation’s most troubled area economically. In fact, Fed economists called Southern California “the weakest large region in the nation.”
“The predominance of the economic weakness has occurred in the southern part of the state,” Cromwell said in an interview. “It continues to be the weak area of the state and of the nation.”
Economists also said that the nation’s sluggishness overall is largely attributable to California’s depressed conditions.
“If you take Southern California and you broke that out of the nation, that would take care of a lot of the economic sluggishness,” Cromwell said.
The report notes that consumer spending improved in most areas.
Economic Outlook
Excerpts from the Federal Reserve System’s 12 regional banks on business conditions in their areas:
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1 Boston: Gradual economic expansion continues. Many regional retailers report that sales gains have been constrained by competition. Commercial real estate markets continue to improve in Boston and northern New England.
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2 New York: Economic development appears slightly more positive in recent weeks. Retail sales are on or above projections. Home builders note little change in the residential construction market, though a few see signs of increased buyer interest.
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3 Philadelphia: Activity remains on a modest upward trend. Manufacturers note gains in shipments and orders, although they indicate employment was merely steady.
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4 Cleveland: Generally expanding economic activity, which is expected to persist into 1994. Activity associated with automobile production and sales appears to be the salient feature of the current economic environment.
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5 Richmond: Most sectors have shown continued improvement in recent weeks. Retail sales are up and manufacturing activity has strengthened further. Tourism, loan demand and real estate activity are improving.
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6 Atlanta: The Southeast economy has resumed a moderate pace of expansion after experiencing sluggish growth in the early fall. Retailers say shoppers began to return to stores in large numbers in late October. Auto dealers continue to report year-over-year gains. The single-family housing market remains one of the strongest sectors.
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7 Chicago: Economic expansion has gathered increased momentum in recent months. Retail sales growth seems to strengthen and sales results for the Thanksgiving weekend generally met or exceeded retailers’ expectations. Manufacturing activity has strengthened further, as auto output climbed back and production gains spread to a wider range of industries.
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8 St. Louis: Economic activity continues to grow. Retailers are more upbeat about the holiday season than they were previously, and car sales are still very strong. Most surveyed firms report increases in sales, orders and employment.
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9 Minneapolis: While still moderate, the pace of growth appears to have picked up somewhat in late fall. Holiday sales are off to a strong start, following improved fall retail sales. Residential construction remains strong.
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10 Kansas City: The economy continues to grow at a moderate pace. Retail sales and housing activity are still increasing, and loan demand at commercial banks is strengthening. District farm income should nearly match last year’s level, but gains in the energy sector appear to be slowing.
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11 Dallas: The district economy expanded at a moderate pace in October and November. Manufacturing respondents say orders and output increased at a steady rate. Retail sales increased slowly. Oil and gas prices and drilling activity declined.
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12 San Francisco: Economic weakness persists in California. Manufacturing, construction, trade and financial sectors remain sluggish. Economic activity also lags in western Washington, reflecting retrenchment in aerospace, and in Hawaii, reflecting a weak tourism industry.
