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Beige Book Shows Modest Recovery

All 12 Federal Reserve reporting districts said economic activity has improved, though only modestly.

NEW YORK (TheStreet) -- Economic activity showed "modest" growth in all of the Federal Reserve's 12 districts, according to the latest Beige Book released Wednesday. The Federal Open Market Committee will reference the report on economic conditions at its next policy-setting meeting later this month.

The report noted growth across consumer spending, tourism, employment, business spending and capital spending but noted slowed inventory investment and continued weakness in commercial real estate.

Consumer spending continued to prioritize necessities over pricey discretionary items although tourism activity picked up, as did residential real estate on account of the expiration of the homebuyer tax credit.

In commercial real estate, "lower rents were said to have led to an increase in leasing activity in New York, Philadelphia, Richmond, Kansas City, Dallas and San Francisco" but high inventories of for-sale or rental properties continued to pressure new private nonresidential construction.

In the financial sector, Beige Book sources reported muted growth and some blamed concerns about the possible impact of the European fiscal crisis, which increased uncertainty and volatility across financial markets.

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The labor market showed only muted gains as people permanently employed across the districts inched higher. The manufacturing industry was responsible for the most number of permanent and temporary hires throughout the regions. Wage pressures also remained muted and the prices of goods and services were stable as higher input costs aren't being passed on to consumers.

The Federal Open Market Committee's next policy-setting meeting is on June 22-23. Earlier on Wednesday,

Federal Reserve

Chairman Ben Bernanke reiterated his belief that the U.S. recovery remains on track in a testimony before the House budget committee.

-- Written by Melinda Peer in New York