April 15 (Bloomberg) -- The Federal Reserve said the U.S. contraction slowed across several of the biggest regional economies last month, with some industries “stabilizing at a low level.”
Five of 12 Fed district banks “noted a moderation in the pace of decline,” the Fed said today in its Beige Book business survey, published two weeks before officials meet in Washington to set monetary policy. Other banks weren’t as positive, with the Atlanta district, the Fed’s second-biggest regional economy, reporting that “activity remained weak in March.”
The report backs Chairman Ben S. Bernanke’s assessment yesterday that the U.S. economy’s decline may be slowing, signaling the possible beginning of a recovery from what may be the worst recession since World War II. U.S. industrial capacity in use fell last month to at least a 42-year-low, while consumer prices in March had their first annual drop since 1955.
Retail sales showed a “slight improvement” in some regions, and there was a “scattered pickup” in home buying, the Fed report said. At the same time, many district banks saw drops in manufacturing, non-financial services, business travel and employment, the central bank said.
“We all know the economy is doing very poorly and that is exactly what this is telling us,” former Fed Governor Frederic Mishkin said in a Bloomberg Television interview. “There are some signs of stabilization, but it could still go very much the other way.”
Slower Decline
Fed districts reporting a slower decline or signs of stabilization include San Francisco, the largest, along with New York, Chicago, Kansas City and Dallas.
The report reflects information collected through April 6 and summarized by staffers at the Dallas Fed. The Federal Open Market Committee next meets in Washington April 28-29.
Economists surveyed by Bloomberg News estimate that the pace of economic contraction eased in the first quarter of this year from the 6.3 percent annual rate in the final three months of 2008.
The Fed decided at its last policy meeting March 17-18 to buy as much as $300 billion in Treasuries and more than double purchases of housing debt to $1.45 billion in a bid to reduce costs of home loans and other borrowing. Two weeks earlier, the Beige Book said 10 of 12 Fed banks reported “weaker conditions or declines” in their regional economies.
Today, a separate Fed report showed output at factories, mines and utilities dropped 1.5 percent last month, more than anticipated and matching the prior month’s decrease. The amount of industrial capacity in use fell to 69.3 percent, the lowest level since records began in 1967.
Pace of Decline
“Manufacturing activity continued to decline in most districts and across a wide range of industries,” the Beige Book said. “Several reports, however, noted that the pace of decline had slowed or that factory activity had stabilized.”
The Fed cited technology equipment in the Dallas and San Francisco districts, defense companies in Boston and Cleveland, food makers in Philadelphia and San Francisco and drug firms in Boston and Chicago as industries with stabilizing or rising demand.
Still, there were “downward pressures” on prices across Fed districts, including drops in both raw materials and finished products. Retailers reported “significant discounting” while accounting, law firms and other services lowered fees, the Fed said.
Prices Fell
The Labor Department’s consumer price index decreased 0.1 percent in March from February, while in the 12 months ended in March, prices fell 0.4 percent, the first decline since 1955.
Bernanke said in a speech in Atlanta yesterday that “recently we have seen tentative signs that the sharp decline in economic activity may be slowing,” citing housing and retail sales. “A leveling out of economic activity is the first step toward recovery.”
Separately, President Barack Obama said in a speech yesterday that “the severity of this recession will cause more job loss, more foreclosures and more pain before it ends.”
Government figures yesterday showed U.S. retail sales fell 1.1 percent in March, following a 0.3 percent gain in February that was stronger than previously estimated.
A report last month showed sales of previously owned homes in the U.S. unexpectedly increased in February as record foreclosures pushed down prices and lured first-time buyers into the market.
‘Potential Buyers’
“Housing markets remained depressed overall, but there were some signs that conditions may be stabilizing,” including an increase in “potential buyers,” the Fed said.
“Nonresidential real estate conditions continued to deteriorate over the past six weeks” and may decline the rest of the year, although there were some hopeful reports that the stimulus package may lead to some improvement,” the report said.
U.S. employers cut 663,000 jobs in March, bringing losses since the slump began in December 2007 to about 5.1 million, the worst in the postwar era, according to the Labor Department. Obama in February signed into law a $787 billion stimulus program that he pledged will preserve or create 3.5 million jobs.
The Beige Book said that the “employment outlook is generally bleak.”
“Labor market conditions were weak and reports of layoffs, reductions in work hours, temporary factory shutdowns, branch closures and hiring freezes remained widespread across districts,” the Fed report said today.
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