The nation's economy expanded at a modest to moderate pace across most of the country the past six weeks as the housing recovery continued to show solid gains, but federal budget cuts dampened manufacturing, the Federal Reserve said Wednesday.
The exception was Dallas, which showed strong economic growth.
Overall, though, the Fed's beige book, named for the color of its cover, depicted an economy growing at a slightly slower pace than in mid-April, when it said all 12 Fed bank districts have grown moderately.
The beige book sketches an anecdotal picture of the economy, but it's consistent with other recent government reports showing that federal spending cuts may be starting to take a toll. This week, a measure of manufacturing activity posted its weakest showing in four years, and a job survey from a private payroll processor Wednesday reported disappointing payroll advances in May.
According to the beige book, the manufacturing industry expanded in most areas of the country, including Boston, Cleveland, Atlanta, Chicago and Dallas. But in Philadelphia, both orders and shipments have dipped, and the near-term outlook worsened in New York. The housing market, however, is buoying manufacturers broadly. In the Cleveland area, suppliers to residential builders saw the strongest gains among manufacturers, and there was rising demand for lumber and wood products in Richmond, St. Louis, Dallas and San Francisco.
The auto industry also continues to boost manufacturing, especially in the Philadelphia, Cleveland, Atlanta and St. Louis areas.
At the same time, defense cuts dampened manufacturing in the Cleveland area, and a defense-related producer in Richmond said orders have been delayed or canceled.
Consumer spending and retail sales, meanwhile, continue to grow but only showed slight to moderate gains in many areas, including Boston, Philadelphia, Atlanta, Minneapolis and San Francisco. Colder-than-usual weather slowed sales in Boston, New York, Cleveland, Chicago and Minneapolis, among other areas. But home furnishing sales were brisk in Boston, Cleveland and Richmond, and appliance sales were strong in the Kansas City area.
Vehicle sales increased moderately across the nation. And tourism was mixed. Late winter weather lifted the skiing industry in Minneapolis. And travel and tourism in Hawaii were robust. But business faltered in Southern California, and cold weather crimped activity in Richmond.
Housing, though, remains a big bright spot. It continued to pick up, showing moderate to strong gains in all areas. Strong demand and low home inventories resulted in multiple offers on many properties. And nearly all areas posted higher home sale prices. The number of foreclosed homes for sale in the San Francisco area has declined significantly. And in Cleveland, builders are discounting less than they had been. In Philadelphia, builders said the extended housing downturn has disrupted the supply of materials and skilled workers.
Helping the housing rebound is a more favorable lending climate. In Dallas, there was strong growth in residential mortgages. And in the New York and Cleveland areas, delinquency rates for both consumer and business loans have fallen.
Hiring, meanwhile, increased "at a measured pace" across the country, with New York showing improvement but Boston employers hiring only to fill vacancies. The labor market improved "slowly" in Chicago. Yet in Richmond and Chicago, government cutbacks led to job losses.
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