Fed report offers upbeat outlook for U.S., local economy


NEW YORK -- No need to get overly excited, but the economy in the Maryland area and the nation is continuing to expand, if modestly.

The Federal Reserve Board's survey of current economic conditions, released yesterday, was upbeat and, given the Fed's tendency to be blase about even the most dramatic trend, unusually emphatic about the overall outlook.

"Economic activity continues to improve," it summarized in its "beige book" report. In particular, manufacturing strengthened throughout the country and retail spending rose in all regions but the Northeast -- which does not include Maryland -- and Northern California. Prices were stable, and housing values appeared to improve.

Conditions were improving in Maryland, but the state has been hit far harder than others nearby and still showed some signs of weakness, notably in housing, despite a particularly strong rebound to the south.

Additionally, even though Maryland manufacturers continue to be optimistic about the next six months, their view had darkened slightly since the last survey in early May, and they were significantly less optimistic than other manufacturers in the 5th Federal Reserve Bank's Richmond, Va., district, which stretches from Maryland to South Carolina.

Importantly, nothing in the survey gave any sign of a truly powerfulexpansion, a stage that often follows a recession.

"It's no great guns; it's slow going," said Robert Graboyes, an economist at the Richmond headquarters. The economy "is still growing, but not as fast as we'd like it to."

In a separate report released yesterday, the Conference Board said confidence among U.S. business executives in the second quarter was at its highest level since the first quarter of 1984, as the private research firm's Business Confidence index rose eight points in the period to a level of 70.

The index was also at a level of 70 in the 1984 first quarter, said board economist Jason Bram.

The continuing gain in the index, which rose seven points in the first quarter, primarily reflected a more favorable assessment of current conditions as expectations increased only moderately, the board said.

The beige book surveys are conducted about every six weeks and are released in anticipation of forth coming meetings of the Federal Reserve Board's open market committee for use in determining monetary policy. The panel's next meeting is scheduled for June 30 and July 1.

The surveys are compiled from phone and mail interviews with retailers, manufacturers and shippers. In the 5th District, 104 businesses responded this time.

Last year, the results portrayed a gyrating economy, but a more consistent turn became evident in March, and the report in May was upbeat. "This survey is similar in tone to the last one," Mr. Graboyes said. "There hasn't been much earthshaking in this survey.

Within the 5th District, manufacturers, retailers, hotels, banks andports all, on average, reported better, if only marginally better, conditions. Similarly, respondents in all of those areas were optimistic about continued improvement six months ahead.

As part of the survey, 19 manufacturers in Maryland were polled. More than half responded that shipments, orders, employment and general conditions were as good as or better than they had been a month before and that they were expected to be still better in six months.

That contrasted strikingly with the January survey, when Maryland manufacturers were quite negative about business prospects.

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