The Federal Reserve has released the Beige Book

 The Beige Book is a compilation of anecdotal information and data on current economic conditions across the country. They call it the Beige Book because its Beige. Shocker! The findings are NOT THE VIEWS OF FEDERAL RESERVE OFFICIALS...instead, each Federal Reserve bank interviews key business contacts, economists, market experts, and other sources in their specific district.

Here is the Reuters Quick Recap...

RTRS-U.S. FED'S BEIGE BOOK SAYS U.S. ECONOMY CONTINUED TO IMPROVE SINCE LAST REPORT IN EARLY MARCH
RTRS-FED SAYS MANY DISTRICTS DESCRIBED IMPROVEMENTS AS ONLY MODERATE, BUT GAINS WERE WIDESPREAD ACROSS SECTORS
RTRS-FED-MANUFACTURING CONTINUES TO LEAD RECOVERY; EVERY DISTRICT CITED EXAMPLES OF STEADY IMPROVEMENT, OFTEN WITH INCREASED HIRING
RTRS-FED-WAGE PRESSURES MOSTLY SEEN AS WEAK OR SUBDUED, BUT HIGHER COMMODITY COSTS PUTTING INCREASING PRESSURE ON PRICES
RTRS-FED-BUSINESSES MOST OFTEN CITED HIGHER ENERGY PRICES, BUT SAW RAW MATERIALS COSTS AS AN INCREASING AREA OF CONCERN
RTRS-FED-MANUFACTURERS SEEING LESS RESISTANCE TO PRICE INCREASES THAN RETAIL, CONSTRUCTION SECTORS
RTRS-FED-CONSUMER SPENDING PICKING UP MODESTLY, BUT SOME DISTRICTS REPORTING WEAKER RETAIL SALES; AUTO SALES UP IN MOST DISTRICTS
RTRS-FED-HOUSING MARKETS WERE WERE LITTLE CHANGED FROM LOW LEVELS OR CONTINUED TO WEAKEN ACROSS ALL DISTRICTS
RTRS-FED-LOAN DEMAND SEEN UNCHANGED OR SLIGHTLY IMPROVED SINCE EARLY MARCH, WITH CREDIT STANDARDS UNCHANGED OR SLIGHTLY TIGHTER
RTRS-FED'S BEIGE BOOK PREPARED BY RICHMOND REGIONAL BANK BASED ON DATA COLLECTED BEFORE APRIL 4
RTRS-U.S. economy improving but energy costs weigh -Fed

Here are a few excerpts from the Release....

On Real Estate and Construction: "Real estate markets for single family homes for the most part either were little changed from low levels or continued to weaken across all Districts. Residential construction was described by Chicago as subdued and the spring building season is likely to be slower than previously anticipated. Market activity was still declining in the St. Louis and Minneapolis Districts, while activity in the New York, Cleveland, Kansas City, Dallas, and San Francisco Districts remained weak. Atlanta characterized the market as mixed, with Florida brokers providing most of the signs of improvement. Both Philadelphia and Atlanta noted that brokers expected the market to improve, and builders in the Cleveland District were more optimistic than in the past several months. A few Districts found pockets of improvement. For example, Philadelphia reported that agents were seeing a pickup in inquiries, showings, and traffic, although there was little increase in sales or construction. Boston noted higher activity in just the last few weeks, due in part to improved weather, and Richmond said that the market for lower-priced homes improved. The multifamily markets strengthened in several Districts, including Chicago, Dallas, Minneapolis, and San Francisco, both in terms of leasing and construction activity."

POSITIVE: "Reports from the twelve Federal Reserve Districts indicated that economic activity generally continued to improve since the last report. While many Districts described the improvements as only moderate, most Districts stated that gains were widespread across sectors"

NEGATIVE: "Real estate markets for single family homes for the most part either were little changed from low levels or continued to weaken across all Districts."

POSITIVE: "Manufacturing continued to lead, with virtually every District citing examples of steady improvement, often with reports of increased hiring."

NEGATIVE: "Wage pressures were described by most Districts as weak or subdued, but higher commodity costs were widely reported to be putting increasing pressures on prices. Energy prices were cited most often, but raw materials in general were an increasing concern of businesses. The ability to pass through cost increases varied across Districts, with manufacturers generally finding less resistance to price increases than either retail or construction (where weak demand was a limiting factor)."

POSITIVE: "Most Districts reported that labor market conditions were generally stronger than in their last reports. New York, Richmond, Chicago, Minneapolis, Kansas City, and Dallas all noted increased employment activity, while Boston and Atlanta reported modest or gradual improvement. However, Philadelphia, Cleveland and San Francisco mentioned limited or delayed hiring, while labor market conditions were mixed in the St. Louis District. Boston, New York, Cleveland, Richmond, and Dallas cited noticeable improvements in the manufacturing sector, and Boston and Kansas observed increased labor demand in the technology sector"

MIXED PERSPECTIVE: "Consumer spending picked up modestly across most Districts since the last report. Consumers were shopping for necessities and looking for lower-priced options or promotional items in the Boston, Chicago, and San Francisco Districts."

UNCERTAIN: "Reports focusing on the near-term outlook were most often upbeat. Some Districts, however, also noted that uncertainties remained high. Boston, Philadelphia, Richmond, Atlanta, Chicago, Minneapolis, and Dallas all noted actual or expected disruptions to sales and production as a result of the tragedy in Japan."

Plain and Simple: A mixed bag of positives and negatives.  Housing is clearly the weakest link in the recovery while emerging economies continue to keep our manufacturing sector busy. Consumer spending isn't picking up fast enough to excite anyone but it isn't contracting at a rapid pace either. It's not hard to see that rising food and energy costs are squeezing consumer balance sheets and reducing disposable income on Main Street.  If wages were rising this wouldn't be an issue, but they're not. The labor market appears to be gaining traction but we'll need to see something more than "moderate growth" if the recovery is to gain momentum.  The recovery is going to be choppy...

We've been harping on the negative impact of rising food and energy prices. We view the economy as being extremely sensitive to even short-term shocks. $3.75 to $4.00/gallon gas prices are certainly a shock, even if they're "transitory".

READ MORE: THE MARGIN SQUEEZE