Reports from the twelve Federal Reserve Districts suggest overall economic activity expanded at a moderate pace during the reporting period from late February to early April, stated the commentary on current economic conditions compiled by the Federal Reserve, known as the Beige Book. The report indicated that economic growth was buoyed by residential construction and auto manufacturing.
The economic snapshot was prepared by the Federal Reserve Bank of Dallas, based on information gathered in preparation for the central banks next policy meet, scheduled for April 30 through May 1.
Following the higher taxes put in place by the fiscal cliff negotiations back in January and the implementation of the automatic federal spending cuts — known as the sequester — in March, the growth thesis put forward many economist postulated that the economy would face tough roadblocks on its path to recovery for the remaining months of the year…
Many signs have materialized that indicate this thesis was correct; retail sales for the month of March contracted on a month-over-month and year-over-year basis, consumer sentiment dropped off significantly in the first week of April, and the monthly Employment Situation report compiled by the Bureau of Labor Statistics showed that the labor participation rate hit a new low for the recovery last month and its lowest level since 1979.
But even with those statistics, Wednesdays report provided economists with a mixed picture; the overall economy grew slowly over the time period analyzed while the job market improving incrementally. Despite the improvements in the housing and automobile sectors, some industries showed signs of the recent government cuts. “San Francisco District defense-related manufactures noted furloughs, layoffs, and plant closures at some production facilities, and military customers in the Chicago District were taking measures to lower costs in anticipation of tighter future defense budgets,” noted the Fed.
However, even retail may be poised to make a comeback. The report noted that consumer spending increased in most districts, though businesses in some regions reported that higher gasoline prices, the expiration of the payroll tax cut, and harsh winter weather restrained sales. “Looking ahead, retailers in several Districts expect modest sales growth in the near term,” said the central bank.