The Beige Book based on information collected before April 4 2011 was modestly upbeat. The economy in the 12 regional Fed districts 'generally continued to improve'...
The Beige Book based on information collected before April 4 2011 was modestly upbeat. The economy in the 12 regional Fed districts 'generally continued to improve'. The Fed stated that 'while many districts described the improvements as only moderate, most districts stated that gains were widespread across sectors'. Concerning recent surges in commodity prices, the survey revealed that pressures to increase wages were 'weak or subdued'.
The report indicated that economic activity 'generally continued to improve' since the last report. Meanwhile, the near-term outlook was 'most often upbeat' despite high uncertainties noted in some districts. Manufacturing led the growth with increased hiring. 10 of the 12 Districts reported a further pickup in production, while Cleveland and Dallas observed steady to slightly improving activity. Consumer spending rose 'modestly' while business services improved in most districts. Nonfinancial services generally reported expansion with demand for business-to-business services increasing in the Boston, Philadelphia, Richmond, Minneapolis, and San Francisco districts. However, residential and commercial real estate performance was mixed across districts. 7 of the districts described 'commercial real estate as slightly improved', while 5 noted that their 'markets were flat'. On the whole, a few districts cited 'pockets of improvement' in the residential markets.
Concerning input costs, most districts reported rises in commodity prices, particularly for energy prices. Wage pressures were, however, contained. Most districts described wage pressures as 'weak or subdued'. The ability to pass through cost increases varied across districts and sectors with manufacturers finding less difficult to raise prices than retail and construction.
The report is relatively upbeat when compared with previous ones. Improvement in economic outlook should be used by hawks as a reason for unwinding stimulus measures at the April Fed meeting. However, the majority of members will prefer waiting for more evidence before hiking interest rates. The bottom line is the asset-purchase program will expire in June while the Fed funds rate will stay at 0-0.25% for the rest of the year.
