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Overall economic activity in the U.S. continued to expand at a modest to moderate in January and early February, according to the latest Federal Reserve Beige Book report. All twelve Districts reported an increase in activity, albeit at varying rates.
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Manufacturing activity improved in 11 of the 12 Districts since the previous report, while St. Louis attributed a decline in manufacturing activity to several factory closings. Philadelphia, Atlanta, Chicago, Kansas City, and San Francisco reported more rapid improvement in factory orders. Chicago cited steel, automotive, and heavy equipment manufacturing as sources for significant new orders growth, while Dallas noted that orders for high-tech goods had accelerated.
Philadelphia and Atlanta suggested that increases in orders were more broad-based. Cleveland and Richmond observed that orders were increasing at the same pace as in their previous report. Demand from abroad, particularly Asia, was cited by several Districts as a driving force in new orders.
Non-wage input costs increased for manufacturers and retailers in most Districts. Manufacturers, in a number of Districts reported having greater ability to pass through higher input costs to customers.
Recent activity in residential real estate varied, but the outlook for residential sales and construction improved marginally. Activity is expected to remain at low levels
Nonresidential construction remained weak according to most accounts. Cleveland District contractors cited increasing inquiries, and unexpected growth in commercial construction was noted in the Minneapolis District. Overall, contacts anticipate a slow recovery in commercial real estate markets.
Energy activity expanded or remained stable since the last report. Kansas City and Dallas noted strong drilling activity, while Cleveland and Atlanta reported a decline in permit issuance. In the Atlanta District, drilling activity remained below pre-Gulf of Mexico oil spill levels, although up slightly since October 2010. Coal production remained above year-ago levels in the St. Louis and Kansas City Districts and held steady according to Cleveland.
Labor market conditions continued to strengthen modestly, with all Districts reporting some degree of improvement. The Boston, Cleveland, Minneapolis, and Dallas Districts cited noticeable improvements in the manufacturing sector, and the Boston and Cleveland Districts also observed increased labor demand in the healthcare and medical sectors.