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Fed's Beige Book again reports moderate growth

WASHINGTON (MarketWatch)
The U.S. economy is still growing at a "modest to moderate" pace seen so far this year, with only a few scattered reports of weakness stemming from federal government budget cuts, the Federal Reserve said Wednesday
The so-called Beige Book released by the Fed, covering the period from early April to late May, seems very close to the tone of the last two Beige Books
The Dallas Fed was the only outlier of the 12 Fed districts, reporting "strong" economic growth
Sequestration was only mentioned in cutbacks in defense spending in the Boston and Richmond districts
Atlanta reported that budget cuts had not hurt the hospitality industry

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WASHINGTON (MarketWatch) — There is little evidence that cutbacks in federal government spending were slowing down the economy, the Federal Reserve said Wednesday.

Instead, the so-called Beige Book released by the Fed, covering the period from early April to late May, said the economy maintained the “modest to moderate” pace that has been in place so far this year.

U.S. Navy Enlarge Image
The Richmond Fed noted a sequestration impact due to reduced defense spending in areas like Norfolk, shown here.
Of the Fed’s 12 district banks, the only outlier was Dallas, which reported “strong” growth.Read about federal government hotel spending, the IPO pipeline and other Beige Book nuggets.

The Beige Book data, with the report of steady, if not spectacular growth, may be one reason that Fed Chief Ben Bernanke has suggested the central bank could reduce the pace of its bond-buying program in a “few” meetings, subject to the economic data.

U.S. stocks /quotes/zigman/3870025 SPX -1.38% slumped Wednesday, and the Beige Book didn’t do anything to help.See Market Snapshot.

There has been concerned that the economy would suffer a summer swoon as it has done for the past few years.


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This year’s culprit was expected to be the sequestration, the across-the-board spending cuts that Congress allowed to take place in March.

However, sequestration was only mentioned a few times: Boston and Richmond districts reported cutbacks in defense activity due to the cuts. Atlanta reported that budget cuts had not hurt the hospitality industry.

In fact, the tourism industry remains a pillar of strength in many regions.

The report said that manufacturing continued to expand in most districts.

One area of some concern could be consumer spending. The report showed that seven of the 12 districts reported only ”slight’ sales growth. Three reported modest or moderate gains. New York reported sales were tepid and Richmond said sales were flat.

Residential housing and construction activity was either moderate or strong across the country.

Reports about the labor market seemed more upbeat, with hiring “at a measured pace” in several districts and some contacts reporting difficulty in finding qualified workers.

The Minneapolis Fed wrote this Beige Book. That duty is rotated between the 12 Fed districts.