The Federal Reserve said the economy in most regions grew last month even as harsh winter weather impeded hiring, disrupted supply chains and kept customers away from stores and auto dealerships.
Eight of the Fed’s 12 districts “reported improved levels of activity, but in most cases the increases were characterized as modest to moderate,” the Fed said Wednesday in its Beige Book business survey. The New York and Philadelphia districts reported declines that were “mostly attributed to the unusually severe weather experienced in those regions.”
The St. Louis district, which includes Arkansas, reported growth at a moderate pace. The report said home sales have continued to improve, increasing by 17 percent in Little Rock, compared with 17 percent in Louisville, Ky., and 7 percent in Memphis. The report said contacts in Memphis reported new commercial construction in Jonesboro and Paragould.
The report for the St. Louis district also mentioned construction of an outlet mall in Little Rock, a reference to The Outlets at Little Rock, a 325,000-squarefoot open-air mall being built near the new Bass Pro Shops at Interstates 430 and 30.
Fed Chairman Janet Yellen and her policy making colleagues are trying to determine whether recent economic weakness stems from harsh winter weather or fundamental obstacles to growth. The Beige Book will be among reports reviewed by the Federal Open Market Committee on March 18-19 during its first meeting led by Yellen since she succeeded Ben Bernanke last month.
The Beige Book report from the 12 Fed district banks may help policymakers decide whether to proceed this month with another $10 billion cut to bond purchases by the Fed, reducing the monthly pace of buying to $55 billion. Three rounds of so-called quantitative easing have pushed up the central bank’s balance sheet to a record $4.16 trillion.
Wednesday’s Beige Book, based on data collected before Feb. 24 and compiled by the Atlanta Fed, said “the outlook among most districts remained optimistic.”
Much of the economic weakness was attributed to weather, according to the Beige Book. Retail sales “weakened” for most parts of the country “as severe winter weather limited activity,” and “weather was also cited as a contributing factor to softer auto sales in many districts.”
Snow and low temperatures also “disrupted supply chains and delayed shipments” in several Fed districts and had “a negative effect on sales and production” at manufacturers. Contacts in most Fed districts were “optimistic about the future and expect manufacturing activity to rise in the coming months.”
On the plus side, the harsh winter “benefited many ski resorts,” and most districts had “an optimistic outlook” for hotel bookings for the rest of the year.
Even a hiring slowdown was ascribed to the weather. Reports from Boston, Chicago and Richmond, Va., said weather caused “at least part of the recent slowdown.”
The Labor Department reported weaker-than-expected payroll growth in December and January and will probably report on Friday that the economy added 150,000 jobs last month, according to the median estimate in a Bloomberg survey of economists. A private report on payrolls released Wednesday showed that companies in February added fewer workers than projected.
“Unseasonably cold weather has played some role,” Yellen said in reply to a question during Feb. 27 testimony to a Senate committee. “What we need to do, and will be doing in the weeks ahead, is to try to get a firmer handle on exactly how much of that set of soft data can be explained by weather and what portion, if any, is due to softer outlook.”
Boston Fed President Eric Rosengren said last week that “if we find out the economy is slow, not because of weather but because of underlying fundamentals,” then “we could certainly pause in terms of the tapering program” for Fed bond purchases.
Businesses predicting a rebound once the weather improves include Target Corp., which said sales showed signs of gaining in February, and Macy’s Inc., which expected that spring will produce a sales recovery after frigid weather forced hundreds of store closings.
“Once warm spring weather arrives and our full assortment of fresh spring merchandise is in place, we believe customers will return to a more normalized pattern of shopping,” Terry Lundgren, the chief executive officer of Macy’s, the second- largest U.S. department-store company, said in a Feb. 25 statement.
Business, Pages 25 on 03/06/2014