Fed: Economy hobbled by winter weather

Extreme winter weather hobbled economic growth across much of the nation in January and early February, with a third of Federal Reserve bank districts reporting weakening or unchanged activity, the Fed said Wednesday.

The Fed's Beige Book, named for the color of its cover, appears to support many economists' suspicion that cold and stormy weather has been a significant reason for an early-year slowdown in job growth, retail sales, manufacturing and housing.

That suggests economic growth could bounce back sharply in coming months as consumers unleash pent-up demand for everything from new homes to apparel. Some economists have suggested other factors such as increased mortgage rates may also be at play, a theory that would cast doubt on the strength of an economic recovery that's generally expected to gain momentum this year.

EMPLOYMENT: Winter chills Feb. job gains, says ADP

ECONOMY: Service sector growth slows as measure of hiring plunges in Feb.

Eight Fed districts reported "modest to moderate" pickup in activity, a downgrade from the moderate expansion that was experienced by virtually all 12 regions in the previous report. The New York and Philadelphia areas had a "slight decline" due mostly to the severe weather. Growth also slowed in Chicago and was unchanged in Kansas City.

Retail sales slipped in most districts, particularly New York, with weather playing a major role in several areas. But the Richmond, Va.; St. Louis , and Minneapolis regions reported modest gains. And the snow and frigid temperatures bolstered sales of weather-related goods in the Richmond, Chicago and Minneapolis districts.

Adverse weather dampened car sales across many regions, including New York, Philadelphia, Chicago and Dallas.

Hotels in Atlanta and Boston benefited from the inclement weather, but "restaurants, museums and other attractions were negatively impacted." The Super Bowl, meanwhile, was a boon for hotels in Manhattan and New Jersey.

Manufacturing also was bat! tered by weather effects, as production and sales fell in many regions, including Boston, New York, Philadelphia, Cleveland, Atlanta, Chicago and St. Louis. The weather caused "utility outages, disrupted supply chains and production schedules, and resulted in a slowing of sales to affected customers," the Fed said.

On the bright side, semiconductor sales remained strong in Boston and San Francisco, and auto production held up well in Chicago despite a weather-related slowdown in sales.

Even more heartening is that "most districts were optimistic about the future and expect manufacturing activity to rise in the coming months."

While the housing recovery continued to advance, growth weakened in many districts. In areas where housing activity contracted, the extreme weather was cited as the culprit. Home sales rose in Richmond, Atlanta, Chicago, St. Louis, and Dallas regions, but fell in the Philadelphia, Cleveland, Minneapolis and Kansas City areas.

"Philadelphia noted that there was very little activity to report in construction or leasing to do severe weather," the Fed said.

Hiring, meanwhile, slowed in the Boston, Richmond and Chicago areas, while gains were modest in New York, Cleveland, Atlanta and St. Louis. Again, the adverse weather was cited as at least a partial factor.