Fed: Economy growing at 'modest to moderate pace'

The Federal Reserve reported Wednesday that the economy grew "at a modest to moderate pace" across the country at the beginning of 2013, even as various policy changes took their toll.

In its latest "beige book," in which the central bank collects anecdotal economic takes from a host of business sources, the Fed reported that labor markets nationwide were generally improving, loan demand was growing and the residential housing market was strengthening.

But while the broad takes on the economy were generally positive, there were specific concerns being aired. For example, the Fed said employers in several areas of the country had cited the unknown impact of the Affordable Care Act as a reason for planned layoffs or an unwillingness to increase hiring. Others cited the expiration of the payroll tax cut, which took effect at the beginning of the year, as a reason for a dip in sales. 

Several manufacturing contacts said concerns over government regulation and fiscal uncertainty were a reason to hold back growth, while some business contacts reported a decline in defense-related projects as sequestration loomed.

Employers also said they were facing some worker shortages in particular areas, such as engineers and software developers. And farmers in Kansas City and Dallas reported that lingering drought conditions had hurt crop and livestock numbers, while other regions reported weaker exports for their agriculture products.

But overall, the news coming from businesses nationwide was generally positive, echoing recent comments from Fed Chairman Ben Bernanke that the economy is growing slowly but steadily.

On housing, business contacts reported to the Fed that low mortgage rates were enticing potential homebuyers into the market, even as home prices edged upwards in most of the 12 distinct Fed districts. Some realtors reported multiple offers on several homes as inventories declined. Commercial real estate activity was reported to be mixed or slightly improved.

The Fed reported "generally modest" increases in manufacturing, as most districts reported slow increases in factory activity.

The latest glimpse into the nation's economy was released one day after the Dow Jones Industrial Average broke a new all-time high.

Many investors credited the Fed's highly accommodative policies, including trillions of dollars in bond purchases and years of near-zero interest rates, as a major reason for the stock market climb.

Those same policies have brought the Fed under harsh scrutiny from Republicans, who contend the policies enable the government to continue borrowing too easily and could encourage damaging inflation down the line.

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