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This is the excerpt from the latest Fed Minutes about the current position of the economy:

The information reviewed at the April 26–27 meeting indicated, on balance, that economic activity expanded at a moderate pace in recent months, and labor market conditions continued to improve gradually. Headline consumer price inflation was boosted by large increases in food and energy prices, but measures of underlying inflation were still subdued and longer-run inflation expectations remained stable.

Private nonfarm payroll employment increased again in March, and the gains in hiring for the first quarter as a whole were somewhat above the pace seen in the fourth quarter. A number of indicators of job openings and hiring plans improved in February and March. Although initial claims for unemployment insurance were flat, on net, from early March through the middle of April, they remained lower than earlier in the year. The unemployment rate edged down further to 8.8 percent in March, while the labor force participation rate was unchanged. However, both long-duration unemployment and the share of workers employed part time for economic reasons were still very high.

Industrial production in the manufacturing sector expanded at a robust pace in February and March. The manufacturing capacity utilization rate moved up further, though it continued to be a good bit lower than its longer-run average. Most forward-looking indicators of industrial activity, such as the new orders indexes in the national and regional manufacturing surveys, remained at levels consistent with solid gains in production in the near term. However, motor vehicle assemblies were expected to step down in the second quarter from their level in March, reflecting emerging shortages of specialized components imported from Japan.

The rise in consumer spending appeared to have slowed to a moderate rate in the first quarter from the stronger pace posted in the fourth quarter of last year. Total real personal consumption expenditures picked up in February after being about unchanged in January. Nominal retail sales, excluding purchases at motor vehicles and parts outlets, posted a sizable gain in March, but sales of new light motor vehicles declined somewhat. Real disposable income edged down in February following an increase in January that reflected the temporary reduction in payroll taxes. In addition, consumer sentiment declined noticeably in March and remained relatively downbeat in early April.

Activity in the housing market remained very weak, as the large overhang of foreclosed and distressed properties continued to restrain new construction. Starts and permits of new single-family homes inched down, on net, in February and March, and they have been essentially flat since around the middle of last year. Demand for housing also continued to be depressed. Sales of new and existing homes moved lower, on net, in February and March, while measures of home prices slid further in February.

Real business investment in equipment and software (E&S) appeared to have increased more robustly in the first quarter than in the fourth quarter of last year. Nominal shipments of nondefense capital goods rose in February and March, and businesses' purchases of new vehicles trended higher. New orders of nondefense capital goods continued to run ahead of shipments in February and March, and this expanding backlog of unfilled orders pointed to further increases in shipments in subsequent months. In addition, survey measures of business conditions and sentiment in recent months were consistent with continued robust gains in E&S spending. In contrast, business outlays for nonresidential construction remained extremely weak in February, restrained by high vacancy rates, low prices for office and commercial properties, and tight credit conditions for commercial real estate lending.

Real nonfarm inventory investment appeared to have moved up to a moderate pace in the first quarter after slowing sharply in the preceding quarter. Motor vehicle inventories were drawn down more slowly in the first quarter than in the fourth quarter, while data through February suggested that the pace of stockbuilding outside of motor vehicles had picked up a bit. Book-value inventory-to-sales ratios in February were in line with their pre-recession norms, and survey data in March provided little evidence that businesses perceived that their inventories were too high.

The available data on government spending indicated that real federal purchases fell in the first quarter, led by a reduction in defense outlays. Real expenditures by state and local governments also appeared to have declined, as outlays for construction projects decreased further in February to a level well below that in the fourth quarter, and state and local employment continued to contract in March.

The U.S. international trade deficit narrowed slightly in February after widening sharply in January. Following a solid increase in January, exports fell back some in February, with declines widespread across categories. Imports also declined in February after posting large gains in January. On average, the trade deficit in January and February was wider than in the fourth quarter.

Overall U.S. consumer price inflation moved up further in February and March, as increases in the prices of energy and food commodities continued to be passed through to the retail level. More recently, survey data through the middle of April pointed to additional increases in retail gasoline prices, while increases in the prices of food commodities appeared to have moderated somewhat. Excluding food and energy, core consumer price inflation remained relatively subdued. Although core consumer price inflation over the first three months of the year stepped up somewhat, the 12-month change in the core consumer price index through March was essentially the same as it was a year earlier. Near-term inflation expectations from the Thomson Reuters/University of Michigan Surveys of Consumers remained elevated in early April. But longer-term inflation expectations moved down in early April--reversing their uptick in March--and stayed within the range that has prevailed over the past several years.

Available measures of labor compensation suggested that wage increases continued to be restrained by the presence of a large margin of slack in the labor market. Average hourly earnings for all employees were flat in March, and their average rate of increase over the preceding 12 months remained low.

The pace of recovery abroad appeared to have strengthened earlier this year, but the disaster in Japan raised uncertainties about foreign activity in the near term. In the euro area, production expanded at a solid pace, though indicators of consumer spending weakened. While measures of economic activity in Germany posted strong gains, economic conditions in Greece and Portugal deteriorated further. The damage caused by the earthquake and tsunami in Japan appeared to be sharply curtailing Japanese economic activity and posed concerns about disruptions to supply chains and production in other economies. Emerging market economies (EMEs) continued to expand rapidly. Rising prices of oil and other commodities boosted inflation in foreign economies. However, core inflation remained subdued in most of the advanced foreign economies, and inflation in the EMEs seemed to have declined as food price inflation slowed.