Fed survey finds recovery is widespread but modest

WASHINGTON - For the first time since the beginning of the recession, economic growth - modest and fragile, but growth nonetheless - has spread to every corner of the country.

A survey released Wednesday found economic activity was improving across all 12 regions of the nation tracked by the Federal Reserve. It was the first clean sweep in the report since 2007.

Metal producers in Chicago and St. Louis cranked out more steel. Makers of drugs and medical equipment in the Northeast did better business. And sales of summer clothes were strong in fashion-conscious New York.

In Phildelphia, retailers reported increased sales, especially for apparel. "It's definitely a better year than last, and we are selectively expanding," one Philadelphia-area merchant told the Fed. Manufacturers in the region also said business generally was improving, though slowly.

Still, the pace of growth in most parts of the country was described as modest. That's a sign that companies probably won't start hiring again anytime soon in great-enough numbers to bring down the unemployment rate.

"It's kind of like having more people sign up to run in the Boston Marathon but no one is running very fast," said Brian Bethune, economist at IHS Global Insight. "You have more people in the race, but they are all running slowly."

Fed chief Ben S. Bernanke sounded a similar note in testimony Wednesday before Congress, telling lawmakers the economy probably will plod ahead in coming months, producing limited growth.

Bernanke said the debt crisis in Europe, which has rattled the U.S. stock market since April, was unlikely to seriously harm the American recovery as long as Wall Street stabilizes.

He also predicted only a slow reduction in the unemployment rate.

The Fed's region-by-region economic survey, known as the Beige Book, provides a unique snapshot of the nation as provided by businesses. The result is a much more intimate look at the overall economy than broad statistics provide.

At the low point of the recession, all 12 regions reported shrinking economic activity.

This time around, the survey found that manufacturing was picking up, retail sales and housing were growing, and tourism was improving. Housing was helped by a tax credit for homebuyers that expired in April.

Commercial real estate, on the other hand, was weak, and the job market got only slightly better. And while shoppers spent more freely, they stayed focused on the necessities, not big-ticket buys.

Highlights from Wednesday's Federal Reserve report on the region's economy from late April to late May:

Business activity overall increased modestly, with most sectors reporting gains. Over the next six months, businesses said the outlook was positive but cautious.

Manufacturers reported increases in new orders and shipments, though the pace of the rise in orders was more muted than in April. "Activity is showing signs of improving, but at

a slow pace," one manufacturer said.

Retailers across the board reported improved sales compared with a year

ago, especially for apparel. One retailer cautioned

that the comparison is

with low levels of sales last year. Auto dealers said sales rose.

Loan volume reported by banks was about the same

as in April - with commercial lending up slightly but consumer lending down.

The pace of housing sales slowed in May because a federal tax credit for buyers ended in April. But sales of existing homes may pick up as recent buyers sell their current homes. Vacancy rates for commercial/industrial properties increased slightly in recent months.

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