The nation's economy grew at a ""modest to moderate pace"" from early April through the end of May, the Federal Reserve said Wednesday in its periodic ""Beige Book"":http://federalreserve.gov/monetarypolicy/beigebook/files/Beigebook_20130605.pdf.[IMAGE]
From late February through early April, the last Beige Book released described economic growth simply as ""moderate."" The sole bright spot in Wednesday's report was in the Dallas Federal Reserve District, which had ""strong economic growth.""
The Beige Book reported slowdowns as a result of federal budget sequestration, which forced a mandatory cutback in spending.
""The defense industry experienced weakening activity in the Cleveland District, and a producer of defense equipment in the Richmond District cited government sequestration and orders being canceled or delayed,"" the Beige Book said. The report also cited contacts as reporting the ""negative effects of sequestration on defense industry tenants seem inevitable"" in Connecticut.
But other than the negative references to the impact of the federal spending cuts, the report was largely positive, despite the comments by the Federal Open Market Committee (FOMC) following its last meeting that ""fiscal policy is restraining economic growth.""
The report cited growing strength in the housing and residential construction sector and the impact on the broader economy.
""Strength in residential construction was a boon to manufacturers who supplied that industry,"" the report said. ""Firms in the Philadelphia District supplying the home-building sector reported strong orders, and the [COLUMN_BREAK]
Cleveland District noted that suppliers to residential construction were among those seeing the strongest activity, while the Richmond, St. Louis, Dallas, and San Francisco Districts all reported increased demand for lumber or wood products.""
Residential real estate and construction activity ""increased at a moderate to strong pace in all Districts,"" the Beige Book said. ""Several Districts reported that higher demand and low inventory of homes available for sale are resulting in multiple offers on properties. Almost all Districts reported higher home sale prices.""
According to the Beige Book, ""overall bank lending increased modestly since the previous report.""
The Cleveland District, for example, said ""demand for residential loans shifted from refinancing to new purchases.""
The report said also ""credit quality improved, on balance,"" with New York and Cleveland reporting ""widespread decreases in delinquency rates for business and consumer loans.""
Hiring, according to the Beige Book, increased ""at a measured pace"" in several districts, with some ""noting difficulty finding qualified workers."" Labor markets continued to improve in the New York District, while the Boston District reported that with only a few exceptions, businesses were not hiring much beyond replacement. Labor markets in the Richmond District were described as ""uneven,"" and employment markets continued to improve slowly in the Chicago.
The report also said most districts noted consumer spending increased during the reporting period, ranging from slight to moderate gains.
Preparation of the Beige Book rotates among the 12 Federal Reserve banks. Some analysts believe the tenor of the report changes based on which bank prepares the summary. Wednesday's report was compiled by the Federal Reserve Bank of Minneapolis, which last prepared the report in November 2011 and said overall economic activity increased at a slow to moderate pace when it struck a moderate tone.
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