The nation's economy proved surprisingly resilient the past six weeks despite the budget standoff in Congress, with activity expanding in all 12 Federal Reserve districts, the Fed said Wednesday.
The Fed's Beige Book report said the New York and Philadelphia Federral Reserve bank districts have rebounded from the near-term effects of Superstorm Sandy, and the pace of growth picked up in the Boston, Richmond and Atlanta regions while slowing in St. Louis.
Still, uncertainty among businesses because of the so-called fiscal cliff of tax hikes and spending cuts - which was partially resolved early this month - dampened the retail outlook in some areas and prompted some employers to hold off hiring. And the economic slowdown in Europe hampered some manufacturing exports.
Consumer spending increased across the country, but holiday sales were somewhat disappointing in the New York, Cleveland, Atlanta, Chicago and San Francisco districts.
Government figures released this week show holiday sales rose 2.7% over last year, far less than the 5.5% pace of 2010 and 2011. Sales of clothing, shoes and furniture were brisk in Boston, while online sales were strong in San Francisco. But retail sales were flat in the Richmond area and the fiscal cliff dampened the outlook in Philadelphia, Kansas City and Dallas regions.
Auto sales, however, remain a bright spot, with sales steady or stronger in 10 districts.
Tourism, meanwhile, rebounded in the Mid-Atlantic and Northeast following the superstorm. And tourism in Boston, Atlanta and San Francisco was bolstered by surging business and international travel.
Manufacturing, however, was mixed, with six districts growing, three contracting and two reporting little or no change. Rising aerospace and chemical production fueled growth in the Boston, San Francisco and Dallas districts. And the resurgent auto and housing sectors helped support manufacturing in Chicago and Philadelphia.
But uncertainty about the fiscal cliff tempered growth in the Richmond area. And steel and auto production slowed in Cleveland.
Overall, however, manufacturers were optimistic about coming months in New York, Philadelphia, Atlanta, Minneapolis and Kansas City.
The housing market also continued its comeback, with activity increasing and prices rising in most districts. Low interest rates and affordable prices sparked home sales in Boston. Still, the hotter market is creating some bottlenecks, with Kansas City reporting higher lumber and drywall costs that limited construction.
Commercial space leasing was more tepid, however, with Boston real estate officials reporting a drop in activity due partly to the fiscal cliff and demand for commercial real estate loans softening.
The budget standoff also caused some employers to delay hiring, particularly in Boston, Richmond, Atlanta, Chicago, Kansas City and San Francisco. Companies in Chicago that do business with Europe also scaled back hiring plans. And the new health reform law prompted businesses in Atlanta and Kansas City to put off adding staff.