The New York Times
By: Christine Hauser
June 8, 2011
Economic activity in the United States continued to grow in April and May, but higher food and energy prices, severe weather conditions and supply disruptions caused by the earthquake and tsunami in Japan put pressure on consumers, according to a survey by the Federal Reserve released on Wednesday.
The central bank's district-by-district report, called the beige book, said that economic activity "generally continued to expand," although at different rates across the country. The pace of growth slowed, for example, in the New York, Philadelphia, Atlanta and Chicago districts. The Dallas district accelerated, while other areas showed growth continuing at a steady pace, the survey said.
The beige book also noted that manufacturing in general expanded, and that activity in the nonfinancial service sectors grew steadily, led by the information technology and business and professional services industries.
The report is intended to get beyond the financial statistics to offer economists and market watchers insights into the regional factors affecting the nation's economy. The report covered a two-month period when the government's economic indicators were growing progressively weaker.
The survey, issued eight times a year, seemed to support remarks made a day earlier by the Federal Reserve chairman, Ben S. Bernanke, who described the country's economic growth as slow and uneven.
Compared with the previous beige book, which raised questions about the impact of the March disaster in Japan, this survey suggested that some of the economic headwinds could be receding.
"What we are seeing is that the business community and the banking community out on the ground see this as a transitory thing," John Canally, an economist for LPL Financial, said. "Businesses in general are seeing through the soft spot."
The report said that the supply disruptions caused by the events in Japan had resulted in a reduction in the flow of new cars to dealer inventories, which in turn had held down sales. In addition, bad weather and high gas prices hurt casino, retail and agricultural activity in several regions.
Those factors affected growth in consumer spending, with most districts indicating steady to modestly increasing activity, the survey said. "Elevated food and energy prices, as well as unfavorable weather in some parts of the country, were said to be weighing on consumers' propensity to spend," the report said.
The Cleveland district noted a sharp drop in auto production, while businesses in the Chicago area said contingency plans were put into play to deal with supply disruptions. High-tech companies in the Boston and Dallas districts reported a lack of parts that had adverse effects on business, according to the survey.
Business activity related to the agriculture sector was varied because of extreme weather. Cool temperatures delayed crops in the San Francisco Fed district; flooding on the Mississippi River slowed activity for farmers in the St. Louis and Atlanta districts. In the Dallas district, severe drought was expected to hurt the wheat crop, while wildfires led to "significant" agricultural losses, the survey said.
Residential construction and real estate continued to show widespread weakness, the survey said. Labor market conditions improved gradually across most of the country, but some districts said there was a dearth of workers with specialized technical skills. Wage growth was modest, the report said, even though highly skilled workers commanded steeper increases.
In a speech to bankers Tuesday in Atlanta, Mr. Bernanke said he was confident that the pace of growth would increase during the second half of the year, and that he continued to see no signs of broad and enduring inflation despite the recent price rises.
"Over all, the economic recovery appears to be continuing at a moderate pace, albeit at a rate that is both uneven across sectors and frustratingly slow from the perspective of millions of unemployed and underemployed workers," Mr. Bernanke said in his speech.
The Federal Reserve's policy-making committee next meets on June 21 and 22.