The Federal Reserve’s latest Beige Book report, which covered the period February 18 - April 2, 2012, was not effusive in its assessment of economic activity, pegging expansion at a “modest to moderate pace.” But a closer look at the report, provided by IHS Global Insight, indicate an uptick in housing demand, residential construction activity, consumer spending, employment and lending. The only dark cloud on the horizon, according to the Federal Reserve’s economic analysis, is gas prices.
The housing market: Unusually warm weather has resulted in improved housing demand in most U.S. districts. Building permits and multifamily housing starts expanded, while home prices were generally down or steady from the last reporting period. Non-residential construction activity showed slight improvement, and builders in five of the 12 districts were optimistic in their outlook for the sector.
• Consumer spending: Upbeat across the board, except for worries about rising fuel costs. People are still buying cars and going on vacations in healthy numbers.
• Employment: Hiring activity improved in most reporting districts, especially in manufacturing, professional services, and IT. Employers in five districts reported difficulty in attracting highly-skilled labor, particularly in the manufacturing sector. Employers in New York are likely to increase payrolls in the coming months.
• Manufacturing: Improved activity in most districts, particularly in the automotive and high-tech industries. Slowing economic activity in Europe and the higher costs of raw materials (especially petroleum) are a concern. Transportation costs are also rising in some districts, and some had difficulty passing these costs on to consumers.
• Lending: The demand for lending improved in the majority of districts, while credit conditions held steady. Real estate lending activity expanded in some districts.
According to the IHS Global outlook, the most recent Beige Book report brought further evidence that “the downtrodden housing market could be on the cusp of a demand-driven recovery.”
Although rising fuel costs were frequently cited by business as a worrisome trend, the warmest March on record (according to the National Oceanic and Atmospheric Administration) boosted manufacturing, construction, and retail sales across most districts. Unless economic conditions worsen considerably, the Fed has indicated that it is less likely to pursue any more quantitative easing (QE), IHS Global noted.