Fed: Economy worsened in early spring

Oil prices briefly topped $115 a barrel for the first time Wednesday. Gasoline prices have soared, too, marching toward $4 a gallon.

Businesses must cope with higher prices for food, fuel and energy products and many raw materials, the Fed report said.

“Most manufacturers have or are planning to increase prices” in response to such rising costs, the Fed said. However, the response of companies in the service sector has been more mixed, the Fed said, “in part due to differences in competitive pressures.”

Overall, most of the Fed’s regions reported “little change in retail price inflation,” the Fed report said, suggesting that producers — and their profits — are getting hit by rising energy and raw material prices.

The government reported Wednesday that consumer prices went up by a relatively modest 0.3 percent in March. Producer, or wholesale, prices, meanwhile rose a lot faster — by a whopping 1.1 percent.

On the manufacturing front, activity varied across the country.

The Fed regions of Chicago, Boston and Richmond, for instance, reported factory activity was rising — but not substantially. But the regions of New York, Kansas City, Philadelphia and Dallas all reported weakening factory production. The regions of St. Louis and Cleveland saw activity hold steady, while the regions of Atlanta, Minneapolis and San Francisco said it was mixed.

Nonetheless, most Fed regions saw a “continued slide” in demand for goods related to housing construction, the Fed said. Uncertainty about economic conditions, the Fed added, is leading to a “generally subdued” outlook for manufacturers.

In a separate report Wednesday, the Fed said big industry production nationwide rose 0.3 percent in March, an improvement from a drop of 0.7 percent in February.

The housing market remained stuck in a rut.

Home building stayed sluggish throughout the nation, although “there were few signs of any quickening in the pace of deterioration,” the Fed said. Declines or downward pressure on home prices were reported in many Fed regions. And the regions of New York and San Francisco noted “some incipient price declines in areas that had previously shown resilience.’

The Commerce Department, in yet another report Wednesday, said home building sank in March to its lowest point in 17 years, fresh evidence of the depth of the housing market’s woes.

The Fed’s survey is based on information supplied by the Fed’s 12 regional banks. The information was collected before April 7.

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