The Federal Reserve’s Beige Book said that “the economy continued to expand at a modest to moderate pace,” echoing comments made in previous months. This is particularly true for manufacturing, with improvements in various measures of activity in most of the regions of the U.S. In some regions there has been some easing of the rate of growth for production after a strong November, December and January.
Among the comments from manufacturers were concerns about rising energy prices and on the difficulties in hiring skilled workers. While the longer-term outlook remains positive, there were also signs that some respondents have become more cautious in their outlooks, particularly about the persistent challenges in Europe.
Looking at consumer spending, the report provided some optimism along with caution. Specifically, it said:
Reports on retail spending were positive, with the unusually warm weather being credited for boosting sales in several Districts. While the near-term outlook for household spending was encouraging, contacts in several Districts expressed concerns that rising gas prices could limit discretionary spending in the months to come. New-vehicle sales were reported as strong or strengthening across much of the United States.
Up to now, consumers have continued making purchases – even as consumer confidence has taken a slight hit – yet, some districts worry that prolonged periods of higher gasoline prices might begin to have an impact at some point.
With that said, overall inflation remains modest, both for prices and for wages. Manufacturing was one of the bright spots regarding employment, as we saw with the release of last week’s jobs numbers. Yet, even here, some employers are cautious about bringing on additional workers until they see “more robust growth,” with some of them filling the gap by bringing on temporary workers “to contain costs and retain flexibility.”
Chad Moutray is chief economist, National Association of Manufacturers.