The Beige Book prepared for the March 15 FOMC meeting "indicated that overall economic activity continued to expand at a modest to moderate pace in January and early February." All twelve Fed Districts reported overall activity as improving though in varying degrees. The biggest positive was in manufacturing as "all Districts, except St. Louis, experienced solid growth in manufacturing production."
The next strongest sector is retail with the Beige book stating "retail sales increased in all Districts, except Richmond and Atlanta." This is in the context of Boston, New York, Philadelphia, Atlanta, and Kansas City noting that severe snowstorms had a negative impact on retail sales.
Changes in loan demand were mixed across Districts, with Richmond, Dallas, and San Francisco experiencing increased loan demand and Kansas City noting a decrease. As already noted by Fed Chairman Ben Bernanke in Congressional testimony, lending standards remained tight across most Districts.
Labor markets are showing modest improvement.
"Boston, Richmond, and Chicago reported more permanent job placements occurring in the market, while Atlanta businesses reported a continued preference for hiring temporary workers rather than permanent workers. Several Districts described an increase in demand for staffing services, especially for high-skilled IT positions."
An increasingly important story is the increasing cost pressures.
"Non-wage input costs increased for manufacturers and retailers in most Districts. Manufacturers, in a number of Districts reported having greater ability to pass through higher input costs to customers. Retailers in some Districts mentioned they had implemented price increases or were anticipating such action in the next few months. . . . Most reporting Districts noted continued strong agricultural commodity prices." However, wage pressures remained minimal except in a few Districts for workers with specialized skills.
Real estate and construction remain at low levels of activity but are showing signs of improvement. Some Districts report increased traffic of potential homebuyers. However, home prices remain under downward pressure. Commercial real estate activity is reported as ranging from "stabilizing" to "gaining traction." Some Districts indicated a boost in leasing activity.
Overall, the Beige Book is consistent with most economists' view that the recovery is slowly gaining momentum with sector strength in manufacturing, followed by the consumer. However, the building inflation pressures bear watching. There was little market reaction to the Beige Book.