Fed Report Points To Modest Recovery

The Beige Book report issued by the Federal Reserve Board at the beginning of May provided further evidence that the U.S. economy is on the slow road to recovery. Almost all of the 12 Fed Districts (the sole exception was Boston) reported signs of improvement or actual increases in economic activity since the last survey was completed in mid-March.

Still, there were a number of regions that expressed concerns about the pace of the recovery and the underlying strength of their regional economies. After a surge in activity during the early spring, several districts indicated that the rate of improvement has slowed considerably while showing no signs of grinding to a halt.

On the down side was the consensus evidence that manufacturers' capital spending plans for the balance of this year remain constrained by the decline in corporate profitability, over-investment in the late 1990s, and current production overcapacity in a large number of industries. In addition, commercial real estate markets remained weak, according to reports from most Fed districts, especially in the San Francisco, Dallas, and Atlanta regions.

More positive in the May Beige Book were reports that retail sales either had increased from mid-March levels or stabilized from the losses reported in the past. Moreover, wage and price pressures remained generally controlled throughout the first third of the year.