Beige Book: Government Reining In Economy
The government is getting in the way of a sustainable economic recovery, according to a Federal Reserve survey of business contacts compiled in its Beige Book report released on Wednesday (March 6). Business contacts in several of the Fed’s 12 districts reported that fiscal and health-care policies are holding back private spending and hiring.
MarketWatch reported that retail sales slowed in many districts through late February and contacts cited fiscal policy and higher gasoline prices as the reason. Labor market conditions were reported to have improved modestly.
Employers in several districts also cited “unknown effects” from the Affordable Care Act as reasons for planned layoffs and a reluctance to hire more staff, the Fed said. Overall, the Fed survey found economic activity expanded at the same “modest to moderate pace” reported in the prior survey which was released in mid-January.
Ten of the Fed’s 12 districts reported gradual growth through late February, while the Boston and Chicago Fed banks said that activity grew at a slow pace.
The Beige Book survey is essentially a collection of anecdotes about the U.S. economy prepared in advance of the March 19-20 meeting of the interest-rate-setting Federal Open Market Committee.
The report of continued modest growth gives little ammunition to Fed officials who want the central bank to begin to scale back its $85 billion-a-month asset purchase program, known as quantitative easing.
Fed Chairman Ben Bernanke has made clear that he does not support a tapering of quantitative easing, at least not yet.
Fed watchers generally expect the plan to continue through the end of 2013. Housing and auto sales remained bright spots in the economy.