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Beige Book: Economy Improving

Economic activity is increasing across most sectors, according to all but one of the Fed's 12 reporting districts.

NEW YORK (TheStreet) - All but one of the Federal Reserve's 12 districts reported improved economic activity, according to the Beige Book, the central bank's report on economic conditions that's used as a reference for the Federal Open Market Committee's meeting on April 27-28.

Outside of St. Louis, which reported "softened" conditions, the regions noted increased retail sales and tourism gains. The services sector, however, showed mixed results. Housing market activity rose from low levels and manufacturing continued to show strength. The financial sector didn't see as much improvement, as loan volumes and credit quality continued to decline. Job prospects, meanwhile, remained weak even though hiring increased, particularly for temporary staff.

Consumer spending and tourism sectors were the report's clear stand-outs, coming on the same day that the Labor Department said

retail sales surged 1.6% in March. The two reports suggested a stronger consumer, which is considered crucial to the recovery's sustainability.

Despite signs of consumer resiliency, increased demand at Minneapolis law firms specializing in debt collections and bankruptcy underscored some of the challenges that continue to pressure Americans as the national unemployment rate remains stubbornly high, at 9.7%. Reporting regions agreed that weakness persisted in labor markets. Wage pressures weren't a concern and retail prices were generally level despite some increasing input costs. "Where producers faced cost pressures on inputs, they were largely unable to pass those prices downstream to selling prices," according to the report.

Earlier, the Census Bureau said its core

Consumer Price Index remained unchanged in March, supporting the view that inflation pressures will remain subdued for some time.

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Manufacturing, which has been a driver of the recovery, remain robust in every district except St. Louis, which report more plant closings than openings.

In banking and finance, both credit quality and lending activity was generally mixed.

The report will be used by the Federal Open Market Committee's next policy-setting meeting at the end of the month. Earlier on Tuesday,

Federal Reserve

Chairman Ben Bernanke also reiterated the central bank's intention to keep interest rates low for an extended period in his testimony on the economic outlook before the Joint Economic Committee in Washington.

-- Written by Melinda Peer in New York