Justa, What's your take on this economy of ours? Data still keeps coming out 'mixed' - Here's the Beige Book info (text link at bottom):
Fed: Economy Slow in March, Early April
By Jonathan Nicholson
WASHINGTON (Reuters) - The Federal Reserve painted a mildly downbeat picture of the
U.S. economy at the beginning of the second quarter of this year, noting slow growth and a
steady weakening in manufacturing activity.
``Almost all districts report a slow pace of economic activity in March and
early April,'' the Fed said on Wednesday in its periodic ``beige book''
summary of national economic activity, which will be used by U.S. central
bankers when they meet to decide interest-rate policy on May 15.
The report's somber tone is likely to reinforce expectations that on May 15
the Fed will reduce interest rates for a fifth time this year -- especially since
it noted little or no price pressures and slacker conditions in the nation's
formerly drum-tight labor markets.
``Industrial activity has continued to weaken, with orders and production
having fallen in many districts,'' the Fed said. ''Labor market tightness has
eased in almost every district.''
One worrisome sign was a pick-up in energy prices -- in some areas to
historic highs -- that the Fed said was replacing its earlier worry over rising wage pressures.
UNLIKELY TO SETTLE RATE DEBATE
The U.S. central bank already has slashed short-term interest rates by a full two percentage points in four equal installments this year, seeking to spur the economy out of a slowdown that set in about mid-2000.
But the mostly anecdotal beige book is unlikely to settle a lingering debate among analysts over whether the Fed will cut by a half-percentage point again, or a smaller quarter of a point. Some recent readings on the economy, including a report from the Commerce Department that showed 2 percent annual economic growth in first quarter, have been stronger than expected.
``Lots of reasons for rate cuts to date, not so clear about the future,'' said Ian Shepherdson, chief U.S. economist with High Frequency Economics in Valhalla, N.Y., in a research note.
``I think it does a lot for the 50 (basis points) side of the debate,'' said Paul Christopher, senior economist with A.G. Edwards & Sons in St. Louis. Christopher said the report's language left little doubt the central bank sees the economy as weak overall.
Many analysts expect the April unemployment report, due out Friday morning, to be a key factor in the Fed's thinking at its next meeting.
While the Fed has said it remains more worried about weakness in the economy than the prospect for inflation, the beige book report suggested some reason for concern about the impact of rising energy prices.
The U.S. trucking industry was being hard hit by high gasoline prices and the Fed said that some industries ``are increasingly passing on these high costs to customers as fuel surcharges.'' It also noted hikes in electricity costs that it said were concerns in Philadelphia and especially in San Francisco.
HOUSING, RETAIL SALES HOLDING UP
Some industries were holding up well amid a generally weaker economic outlook at the start of the second quarter. In particular, the Fed noted that new home sales and construction ''have been picking up or steady,'' helped by cheaper interest rates that have benefited builders and buyers.
The Fed said that retail sales strengthened in April from a weak March. One hopeful sign was that retailers in most districts said they were not overburdened with excess inventories. ``Still, retailers in most districts are expecting only small gains, at best, in upcoming months,'' the beige book said.
But other industries continued to struggle. ``The high-tech and telecommunications industries are experiencing a pronounced slowdown,'' the Fed said, citing six of the 12 Fed regions as reporting declines in sales or new orders of computer equipment.
That view was echoed by Robert Parry, president of the Federal Reserve Bank of San Francisco. In an appearance in Costa Mesa, Calif., Parry said it was ``probably correct'' that the boom in capital investment by businesses in recent years had created an excess of high-tech goods.
Parry does not have a vote in interest rate decisions this year, following the usual voting rotation among Fed bank presidents.
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Link to summary Beige Book text:
federalreserve.gov |
