Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, May 6, 1993 TAG: 9305060123
SECTION: BUSINESS PAGE: B8 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
Manufacturing was strong in most of the central bank's 12 districts, and a drop in sales in March was described as temporary for the most part.
"Reports . . . indicate generally modest improvement in economic conditions across much of the nation," said the Fed's beige book, named after the color of its cover.
"Shopper traffic and retail sales were reported to have rebounded modestly in April, following general declines in March resulting in part from severe weather," it said.
Recent government statistics have cast the economy's performance so far this year in a far more negative light than Wednesday's beige book, which is based on interviews with business people across the country prior to April 23.
The Fed is attributing much of the slowdown to the mid-March blizzard that hit the eastern third of the country.
"The basic message was the weather was an important factor in the economy's slowing; there's no fundamental weakness, and, as the weather improves, the statistics should improve," said economist Robert G. Dederick of The Northern Trust Co. in Chicago.
The Fed's assessment means it is unlikely to cut short-term interest rates anytime soon without further evidence of economic weakness, he said.
"I think the Fed is clearly not going to do anything. . . . But if they see that demand remains sluggish [in April and May] after the weather got better, that would begin to send out alarms," he said.
The central bank was particularly upbeat about manufacturing. Steel and auto factories are operating at near capacity, and most manufacturers are reporting increased orders.
However, most factories so far are meeting higher production schedules through overtime rather increased hiring, the Fed said.
"Job conditions are mixed in most regions. . . . Some firms are hiring modestly. . . . However, no district anticipates a flurry of new hiring in the near term."
The report, prepared by the Cleveland Fed, was based on information obtained before April 23. It is to be used at the May 18 closed-door meeting of the Federal Open Market Committee, the central bank's monetary policy-makers, who will determine the course of short-term interest rates over the next six weeks.
The report also said residential real estate activity is strong and on the rise in most districts. It said bank lending is picking up for consumer purchases and mortgage refinancing and, in some areas, for small businesses.
It said prices were stable, except for steel and energy, but "job cutbacks in aerospace and defense-related manufacturing are combining with recently proposed military base closings to hurt consumer confidence and economic activity."
In New York, the explosion at the World Trade Center actually helped the economy slightly by providing cleanup and reconstruction jobs, it said.
by CNB