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The Federal Reserve released a report this week stating that U.S. economic expansion remained “moderate.” The Feds attribute most of the recent economic gains to the recovering housing market.
“Most districts noted increases in manufacturing activity since the previous report,” the central bank said in its Beige Book business survey, which is based on reports from the Fed’s 12 regional banks from late February to early April. “Particular strength was seen in industries tied to residential construction and automobiles.”
Most regions reported that residential and commercial real estate had improved substantially. With housing sales on the rise nationwide and home lenders issuing more loans, the market was slowly showing signs of national recovery.
“Employment conditions remained unchanged or improved somewhat,” the report said.
Many policy makers are stating that the Fed should keep the April stimulus in effect until more recovery has been realized, particularly in lieu of the recent defense spending cutbacks that have effected the gross economies of a dozen states.
With moderate gains in auto sales and housing, most analysts said an increase in taxes was also working against recovery and hindering growth. At the same time, however, analysts were cautiously optimistic that moderate growth would continue.
“Continued modest growth right now is most likely,” said Josh Feinman, the New York-based global chief economist for DB Advisors, the Deutsche Bank AG asset manager overseeing $228 billion, and a former Fed senior economist in Washington. FOMC members “thought that if the outlook for labor-market conditions improved as anticipated, it would probably be appropriate to slow purchases later in the year and to stop them by year-end,” he concluded.
