The nation's economy expanded in all 12 Federal Reserve districts in late January and February, though a recent payroll tax increase, the new health care law and the budget standoff in Washington tempered consumer spending and hiring, the Fed said Wednesday.
Overall, the economy has been resilient despite the tax increase and the
prospect of $85 billion in federal spending cuts that began to take effect March
1. The economy grew moderately in five districts, modestly in five others and
"slowly" in the Boston and Chicago areas, the Fed said in its "beige book"
report.
The housing rebound gained steam, and manufacturing and consumer spending grew
moderately, while the labor market generally improved, and bankers opened the
lending spigots a bit more.
Consumer spending picked up in most areas. Retail sales grew in the Philadelphia
and Richmond, Va., areas in particular, but bad weather crimped sales in the
Boston, New York and Minneapolis regions. Sales slowed overall in Kansas City.
The end of the payroll tax holiday in January, businesses' worries about
expenses from the health care law, the budget battle and rising gasoline prices
all hampered retail activity, the Fed said.
The auto market, however, remains a bright spot, with sales solid or strongly
increasing in most districts. Auto dealers in the Philadelphia-New Jersey area
said lingering effects from Superstorm Sandy, which damaged cars, continue to
bolster sales.
Business at Minnesota ski resorts was running ahead of last year. Boston and
Atlanta saw a surge in foreign tourists. New York hotels continued to do well,
in part because of residents displaced by the storm.
Manufacturing also expanded, though at a modest pace. Boston, New York,
Cleveland, Atlanta and Chicago were among the areas reporting slightly more
activity. Meanwhile, auto production increased in Cleveland, Chicago and St.
Louis districts. The uptick was so brisk in Minneapolis that one manufacturer
plans to renovate a plant.
The housing recovery, meanwhile, also spurred a pickup in wood product
manufacturing in the St. Louis and San Francisco areas, household goods
production in Chicago and cement manufacturing in Dallas. Overall, industry
officials are more optimistic about coming months than they were in the January
beige book survey, the Fed said.
Housing gained momentum in most areas, with strong growth in home sales reported
in the Boston, St. Louis, Minneapolis, Kansas City, Dallas and San Francisco
areas.
Home construction also advanced in most areas, except Kansas City. Home prices
generally rose.
The commercial real estate market is also starting to turn around. Office
vacancy rates fell in New York City, and Upstate New York posted the lowest
industrial vacancy rate in three years.
Low interest rates drove strong demand for housing loans in the Philadelphia,
Cleveland, Richmond, Atlanta and Chicago districts. San Francisco lenders said
that competition was growing intense for qualified borrowers. Those are positive
signs, as lenders generally have been cautious since the housing crash.
