Beige Book: Manufacturing Shows Pockets Of Growth

By Agence France-Presse The US economy was lackluster as war began in Iraq, but the final impact of the conflict is uncertain, the U.S. Federal Reserve's Beige Book survey said April 23. Fears of severe acute respiratory syndrome, or SARS, spreading globally from Asia began to hurt international travel, it said. "Reports from the 12 Federal Reserve districts suggested that the pace of economic activity continued to be lackluster during March and the first two weeks of April," the closely watched report said. "The onset of the war with Iraq appeared to have some effect on sales and spending, although it is too early to ascertain the full effect of the war on both consumer and business confidence." Half of the central bank's districts reported "mixed or soft" economic conditions, it said. Five districts, including New York, said the pace of the economy was slower than reported earlier. The Beige Book survey summarizes information collected by the 12 districts of the Federal Reserve System. It is released eight times a year. Consumer spending was generally weak in March, partly because of poor weather and the onset of warm, it said. Car sales were mixed. Retail industry contacts warned the Federal Reserve that it was difficult to make good comparisons with last year because Easter fell in April this year, compared with late March in 2002. "Optimism remained that the retail environment would improve within the next six months," the Beige Book report said. Most areas of the country reported weakness in manufacturing, although there were some pockets of growth. Nine of the Federal Reserve districts reported slowing manufacturing activity. But some areas improved such as hardware, semiconductors and machine tools in Boston and defense-related manufacturers in Atlanta. "Businesses continued to report a cautious attitude toward spending, and commercial real estate was reported to still be in a slump," the central bank report said. "In contrast, homebuilding activity remained strong across all districts. Mortgage lending, buoyed by refinancing activity, remained strong, and a few districts noted some improvement in commercial loan demand." Most of areas of the country reported weak labor markets, with several Federal Reserve districts noting substantial layoffs in March and early April. But hints of improvement emerged, with Cleveland and Kansas City reporting fewer plans for staff reductions, while New York, Atlanta and Dallas reported stronger demand for temporary workers. "No reports of widespread inflationary pressures were mentioned," the Beige Book said. Despite higher prices for energy-related inputs, most manufacturers held the prices of their goods steady. Retailers noted heavy discounting with falling prices for clothes and electronics. Copyright Agence France-Presse, 2003