Paul Davidson, USA TODAY
The economy’s humdrum performance of late continued in late February and March, with solid advances in the labor market and housing offsetting a mixed performance for manufacturing, the Federal Reserve said Wednesday.
Its beige book said the economy grew modestly to moderately in most Fed bank districts, similar to its last report. And contacts in the regions expected little change in the near term as low commodity prices continued to hamper crude producers and related manufacturers, as well as farmers. The beige book, named for the color of its cover, offers an anecdotal snapshot of the economy that expands on the hard data in official reports.
Consumer spending, which makes up 70% of economic activity, appeared to slow. But there were two possible bright spots: Sluggish wage growth appears to be picking up and business spending “generally expanded across most districts.” Capital outlays had been lackluster amid the manufacturing and energy downturn.
Yet manufacturers in the Boston and the Midwest areas boosted purchases over the past six weeks. At the same time, spending remained modest for San Francisco factories and Dallas oil refiners, and Kansas City makers pulled back further. Other sectors loosened their purse strings. Retailers in the Boston and San Francisco regions upgraded facilities while several in Boston expanded capacity. Meanwhile, investment accelerated among tourism companies in Philadelphia and Atlanta; construction and finance firms in Cleveland; high-tech and wholesale trade businesses in Kansas City; and pharmaceuticals companies in San Francisco.
Hiring also strengthened in most regions, the report said, particularly in the service sector. That’s consistent with the Labor Department’s recent report that employers added 215,000 jobs in March. Several areas struggled to fill openings, including for retail workers in Boston; low-skilled manufacturing workers in Chicago; construction workers in Cleveland, Richmond, Atlanta and San Francisco; and professionals in computers, accounting, engineering and customer service in Atlanta and Richmond.
Not surprisingly, several districts “reported signs of a pickup in wage growth.” Boston, Cleveland and St. Louis recorded “sizable wage increases for employees in fields such as information technology services and skilled construction and manufacturing trades,” the beige book said.
Overall, manufacturing picked up in most regions, with moderate growth in Richmond and Chicago, and modest gains in Philadelphia, St. Louis and San Francisco. Cleveland and Kansas City, however, saw activity decline. Oil and gas suppliers are still hurting amid weak demand. But healthy gains were reported by Midwest automakers and aerospace producers, computer and electronics firms in Boston and Dallas, and construction materials factories in Philadelphia, Cleveland and Chicago.
The construction and real estate sector continues to gain momentum following the mid-2000’s crash. Home sales accelerated sharply in the San Francisco, Cleveland and Boston areas but were mixed in Dallas, Kansas City and Atlanta. A mild winter lifted activity in several regions. Multifamily construction remained strong broadly and demand for single-family building heated up in the Midwest. Commercial real estate brokers were also busy, “with leasing activity and rents rising in many districts,” particularly for retail space in Chicago and industrial properties in Dallas.
Consumer spending, meanwhile, increased “modestly” in most districts, reflecting the relatively weak gains in consumption reported by the government so far this year. The Fed’s contacts in Chicago “again expressed disappointment that low gas prices and improving labor markets were not providing more of a boost to consumer spending.” Still, spending ticked up in the the Kansas City, Philadelphia, Richmond and San Francisco areas, while furniture sales were higher in some regions. Both business and leisure travel was strong or rising in Boston, Chicago and Richmond. But there were fewer international visitors in Atlanta, Boston, Minneapolis and New York. The strong dollar has increased the cost of trips to the U.S. for travelers from overseas.