Caution Over US Growth in Fed Report and Orders Survey

25 April 2002

New reports underline yet again that the widely expected US economic recovery may not be swift.

The Federal Reserve’s Beige Book state-of the-nation report – drawn up for its meeting on May 7 – pointed to signs of improvement, but voiced concerns over the rate of the upturn, saying that some regions “expressed qualifications about the pace of the recovery.”

Covering March and early April, the report found a “generally positive outlook” among executives, as retail sales either held firm or increased in most areas (despite mixed results for auto sales) and manufacturing conditions were widely reported as stable or improved.

There were also boosts in tourism, home sales and construction activity, though the commercial real-estate sector remained slow. However, it also found a “slack” job market and “limited” investment plans among manufacturers.

The Fed’s caution was borne out by a survey from the Commerce Department that found orders for durable goods dropped 0.6% in March to $173.4 billion (€193.5bn; £119.5bn) after a revised 2.7% increase in February. Such a drop compares badly with economists’ predictions of a 0.5% rise.

Moreover, orders excluding military equipment fell an even steeper 1.2%, with industrial machinery down 1.4%, electrical gear 2.3% and communications equipment 14.6%. This is the third month out of the last four in which non-military orders have slipped, though different surveys have recently pointed to a turnaround in capital expenditure.

Data sourced from: Financial Times; The Wall Street Journal Online; additional content by WARC staff