Beige book: Economy grew in past six weeks
But manufacturing has been the biggest drag on growth
The oil price crash has curbed orders for pipes and other products.
The economy expanded in most regions over the past six weeks, but activity slowed in some areas as the manufacturing industry continued to struggle, offsetting the recovering housing market and growth in consumer spending, the Federal Reserve said in a report Wednesday.
Its “beige book,” which offers an anecdotal snapshot of the economy, appeared to show more sluggish activity than its previous report and coincided with a selloff in markets early this year amid weakness overseas and an oil industry downturn.
“Most districts noted that weak demand from the energy sector was creating a significant headwind for manufacturers,” the report said.
The Fed said the economy grew moderately in its Richmond and San Francisco districts and modestly in the Cleveland, Atlanta, Chicago, Minneapolis and Philadelphia areas. But performances were “mixed” in St. Louis and Boston, flat in New York and Dallas and down in Kansas City.
Manufacturing has been the biggest drag on growth, with China’s slowdown and weakness in the eurozone combining with a strong dollar to curtail exports. And the oil price crash curbed orders for pipes and other products. The Boston, Cleveland, Chicago and San Francisco areas were among those reporting flat-to-moderate growth, while the New York, Philadelphia, Kansas City and Dallas regions posted slight-to-moderate declines.
The culprit was weak energy demand in areas such as Boston, Philadelphia, Chicago and Dallas. At the same time, lower energy costs made for cheaper production of steel products in San Francisco. But the global drop in commodity prices has hurt farmers and rippled to manufacturers in Chicago and Kansas City, Mo.
The auto and aerospace industries remained bright spots in the Cleveland and Chicago districts.
Consumer spending has been a strong suit for the economy, and sales rose moderately in Philadelphia, Richmond, Atlanta and San Francisco. Yet the market turbulence and economic concerns appeared to dent shoppers’ confidence. Fed contacts in Boston, Cleveland and Chicago noted “consumers seemed reluctant to spend, citing reluctance to add debt, financial market volatility or economic uncertainty as significant factors.”
Auto sales have been an economic pillar for many months and continued to show strength in areas such as Chicago, San Francisco, New York and Minneapolis.