Fed Says Economy Expanded ‘Somewhat’ in Most of U.S. (Update1)
By Scott Lanman
April 14 (Bloomberg) -- The Federal Reserve said the economy expanded “somewhat” across most of the U.S. in March as consumer spending and manufacturing improved, signaling the recovery is broadening without gaining much speed.
“Overall economic activity increased somewhat since the last report across all Federal Reserve Districts except St. Louis, which reported ‘softened’ economic conditions,” the Fed said today in its Beige Book business survey, published two weeks before the Federal Open Market Committee meets to set monetary policy.
Fed Chairman Ben S. Bernanke and his colleagues are debating how and when to tighten credit, including whether to modify a pledge to keep interest rates very low for an “extended period.” Earlier today, Bernanke told lawmakers there are “significant restraints” on a recovery he said will be “moderate” over the coming quarters.
“While labor markets generally remained weak, some hiring activity was evident, particularly for temporary staff,” according to the Beige Book. Consumer prices “generally remained level,” and producers had difficulty passing along increases in some raw materials, the Fed said.
Today’s report reflects information collected on or before April 5 and summarized by staffers at the Minneapolis Fed. Fed policy makers next meet April 27-28. The prior report, released March 3, said the economy improved in nine of the Fed’s 12 regions, in most cases at a “modest” rate.
Stocks Rise
Stocks rose for a fifth day after a Labor Department report showed retail sales rose more than anticipated and results at Intel Corp. and JPMorgan Chase & Co. beat analysts’ estimates. The Standard & Poor’s 500 Index climbed 0.8 percent to 1,206.88 at 2:18 p.m. in New York.
The St. Louis Fed reported declines in manufacturing and service industries in its section of the Beige Book released today.
The economy expanded at a 5.6 percent annual rate in the final three months of 2009, led by inventory restocking. That pace probably slowed to 3 percent in the first quarter of 2010, according to the median estimate in a Bloomberg News survey of economists this month.
Consumer spending increased, with several Fed banks saying consumers were “somewhat more confident” and businesses “cautiously optimistic” about future sales.
A government report earlier today showed sales at U.S. retailers climbed in March by 1.6 percent, more than analysts anticipated and the most in four months. Gains for February and January were revised up.
Auto Dealers
Eleven of 13 major categories showed increases in sales last month, led by a 6.7 percent advance at auto dealers. Purchases of building materials jumped 3.1 percent, the most since November 2007, and receipts at clothing stores increased by the most in a year. Vehicle sales increased in recent weeks in eight Fed regions, the central bank said.
Reports earlier this month showed service industries expanded in March at the fastest pace since May 2006, while manufacturing grew at the quickest rate since July 2004.
“Business services were mixed, with some signs of economic recovery,” the Fed said today. Manufacturing increased since the last report in most of the U.S.
Four regions reported “strong demand” for temporary staffers, and in the Atlanta area, many companies kept increasing the number of hours for existing workers. U.S. employers added 162,000 jobs in March, the third gain in five months and the most in three years. The unemployment rate held at 9.7 percent, close to a 26-year high.
Consumer Prices
The Labor Department’s consumer price index, minus food and energy, rose 1.1 percent for the year ended in March, slowing from a 1.3 percent rate in February and 1.6 percent in January. Fed officials have a longer-run goal of 1.7 percent to 2 percent for a separate price index including all costs.
Last month, U.S. central bankers wrapped up $1.25 trillion in purchases of mortgage-backed securities aimed at keeping costs on home loans low. The purchases have expanded the central bank’s balance sheet to $2.31 trillion in total assets from $926 billion at the start of 2008.
Bernanke said today that “weakness in both residential and nonresidential construction” is holding back economic growth.
The housing market gained, “albeit from low levels,” in 10 of 12 Fed regions, the central bank said. The commercial real estate market was “slow” across the U.S.
Lending demand was mixed in most areas, and credit standards were “generally unchanged” across the country, the Fed said.
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