Small steps to recovery seen

The Federal Reserve said yesterday that the decline in the U.S. economy slowed across several of the nation's biggest regions last month, with some industries "stabilizing at a low level."

Five of 12 Fed district banks - in Chicago; Dallas; Kansas City, Mo.; New York; and San Francisco - "noted a moderation in the pace of decline," the Fed said in its Beige Book business survey.

Other districts, including Philadelphia, were not as positive, with the Atlanta district, the Fed's second-biggest regional economy after San Francisco, reporting that "activity remained weak in March."

In Philadelphia, the Fed said, "Economic activity . . . continued at a slow rate in March." It reported poor conditions in the area for manufacturing, retailing, bank lending, residential and nonresidential real estate, and the service sector.

"The outlook in most industries in the [Philadelphia] district is subdued," the Fed said.

But nationally, the report backed Fed Chairman Ben S. Bernanke's assessment Tuesday that the economy's decline may be slowing, signaling the possible beginning of a recovery from the recession that began in December 2007.

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, nonfinancial 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 an interview. "There are some signs of stabilization, but it could still go very much the other way."

The report - called the Beige Book for the color of its cover - reflects economic information collected through April 6 and summarized by staffers at the Federal Reserve Bank of Dallas. The survey is taken about eight times every year.

"Manufacturing activity continued to decline in most districts and across a wide range of industries," the Fed said. "Several reports, however, noted that the pace of decline had slowed or that factory activity had stabilized."

It cited technology equipment in the Dallas and San Francisco districts, defense firms 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 costs across Fed districts, including drops in prices for both raw materials and finished products. Retailers reported "significant discounting," while accounting, law firms, and other services lowered fees, the Fed said.

The Beige Book said the "employment outlook is generally bleak." The nation's jobless rate in March was 8.5 percent, up from 8.1 percent in February and from 5.1 percent a year ago.

Highlights from yesterday's Federal Reserve report on the region's economy in March and early April.

Business conditions were slow but steady.

About one-half of area manufacturers said they saw declines in shipments and orders, while one-tenth reported higher levels.

Retail sales were below last year's. Auto sales were very weak.

Loan volume was flat. There was some boost in consumer credit lending, but decreases in commercial, industrial and home-mortgage lending. Businesses were being conservative with taking on debt. "They're cutting inventory and postponing expansion, and paying down their lines" of credit, said one banker.

Builders and real estate officials described the housing market as "bouncing along the bottom."

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