Beige Book: Fed reports modest gains in 8 of 12 districts despite weather

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The Federal Reserve said the economy in most regions grew last month even as harsh winter weather impeded hiring, disrupted supply chains and kept customers away from stores.

Eight of the Fed's 12 districts "reported improved levels of activity, but in most cases the increases were characterized as modest to moderate," the Fed said Wednesday in its Beige Book business survey. The New York and Philadelphia districts reported declines that were "mostly attributed to the unusually severe weather experienced in those regions."

In the Fourth District, which includes Pittsburgh, the severe weather was viewed "mainly as an inconvenience." Activity in the construction sector "slackened a bit" and retail purchases were characterized as "disappointing," although auto sales showed gains.

The Beige Book will be among reports reviewed by the Federal Open Market Committee on March 18-19 during its first meeting led by Janet Yellen since she succeeded Ben S. Bernanke last month.

The Beige Book report from all 12 Fed district banks may help policy makers decide whether to proceed this month with another $10 billion cut to bond purchases by the Fed, reducing the monthly pace of buying to $55 billion. Three rounds of so-called quantitative easing have pushed up the central bank's balance sheet to a record $4.16 trillion.

"This has some value precisely because it provides more anecdotal evidence, a more concrete rationale, in support of the slowdown being weather-induced," said Eric Green, a former New York Fed economist who is now the global head of rates, FX and commodity research at TD Securities in New York. As winter ends, "you would be expecting to see growth bounce higher and I think job growth could also bounce higher."

The Beige Book, based on data collected before Feb. 24 and compiled by the Atlanta Fed, said "the outlook among most districts remained optimistic."

Retail sales "weakened" for most parts of the country "as severe winter weather limited activity."

Snow and frigid temperatures also "disrupted supply chains and delayed shipments" in several Fed districts and had "a negative effect on sales and production" at manufacturers.

On the plus side, the harsh winter "benefited many ski resorts," and most districts had "an optimistic outlook" for hotel bookings for the rest of the year.


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