Fed: Economy improving, but rising prices a concern

However, the economic impact of the Japanese earthquake, tsunami and nuclear crisis was a common concern, as business leaders in several areas expected disruptions in their business from it.

In addition, businesses “widely reported” that rising commodity prices are increasing the pressure on prices, with the recent spike in energy costs cited as a common culprit.

Some relatively stronger industries — like manufacturing — said they were able to increase prices to address the higher costs of raw materials without much resistance. But in more competitive industries where weak demand persists — like retail or construction — companies had a tougher time boosting prices to match higher costs.

The Fed has maintained that its accommodative monetary policy is not driving recent price increases, and that the underlying threat of long-term inflation remains low.

The housing sector, which has been a continued blight on the fledgling economic recovery, continued to drag, according to the Fed. The real estate market for single-family homes remained stuck at low levels or further weakened in all 12 Fed districts. That sluggishness is expected to reduce expectations for home constructions as builders gear up for the spring building season.

While most districts reported stagnant or weakening housing markets, a few found room for optimism. The Fed noted in its report that brokers in Philadelphia, Atlanta and Cleveland all were optimistic about the coming months as they saw increased inquiries and home showings, if not necessarily sales.

On the commercial side of the real estate market, all districts reported continued struggles, although seven reported slight improvements since the beginning of March.

The labor market strengthened nationwide, the Fed reported, as most districts reported some level of increased employment activity. One employment agency in New York reported that March was its “best month in years.” 

However, employers in several districts reported they were having a tough time finding highly specialized workers, while other districts reported some layoffs continued to occur.