The economy grew across the US in March and early April according to the survey of business contacts by the US Federal Reserve.
Five of the 12 districts in the Federal Reserve system said growth was “moderate”, another five said it was “modest” – the next step down on the Fed’s scale of adjectives – while another two said growth had “accelerated slightly” since the last report.
The comments from the latest Beige Book survey are an encouraging sign that tax rises at the start of the year and sequestration cuts to public spending from the start of March have not destroyed the economy’s momentum.
But the survey tends to look backwards and may be lagging behind some recent data, such as weak retail sales and jobs growth of only 88,000 in March.
“Overall economic activity expanded at a moderate pace during the reporting period from late February to early April”, says the report.
The Beige Book is a narrative commentary on economic conditions across the US compiled by regional Fed banks from their conversations with local businesses. It backs up numerical indicators such as industrial production and purchasing manager surveys.
The bright spots in the economy were in manufacturing, especially linked to the automobile sector, and homebuilding. That fits with the pattern in the economy of faster growth in areas that are most sensitive to the Fed’s low interest rates.
But the report noted that, “several districts reported uncertainty or weakness in defence-related sectors”, suggesting that public spending cuts were starting to hold back the economy.
“Consumer spending grew modestly, and firms in some districts cited higher gasoline prices, expiration of the payroll tax cut, and winter weather as factors restraining sales growth,” said the report. But it said retailers in several districts expected sales to continue to grow.
“Outlooks among respondents remained optimistic across sectors and districts, with growth mostly expected to continue at the same or a slightly improved pace,” says the report. “Some uncertainty remained, primarily regarding fiscal policy and healthcare reform.”
Get alerts on Federal Reserve when a new story is published