The nation’s economy grew modestly in recent weeks, with nine of 12 districts expanding, according to a Federal Reserve report released Wednesday. The economic picture was mixed in the Cleveland and Richmond areas, and it weakened in the Atlanta region.
On the bright side, auto sales and travel and tourism perked up, and lackluster lending markets improved slightly, according to the Fed’s beige book, named for the color of its cover.
Overall, the survey portrayed an economy that continued to plod along in September and early October – after expanding fairly robustly early this year – as many nervous businesses put off capital investment and hiring.
“On balance, national economic activity continued to rise, albeit at a modest pace,” it stated.
Manufacturing and retail sales were up moderately, while housing and commercial real estate were still in the doldrums. The job market remained listless.
Still, the report, which provides a ground-level snapshot of every region in the country, amounted to an improvement on the Fed’s July-August survey, which showed “widespread signs of deceleration.” Economists said the latest report did nothing to dampen speculation that the Fed will launch a new round of government bond purchases at its Nov. 3 meeting to lower long-term interest rates and spark the economy. Brian Bethune of IHS Global Insight anticipates $500 billion to $750 billion in purchases, less than the $1.7 trillion the Fed snapped up in late 2008 and early 2009.
Factories continued to be a bright spot last month. Makers of semiconductors boosted output in Boston, Dallas and San Francisco. Auto production surged in the Cleveland and Chicago areas. And Chicago metal makers reported their strongest sales this year. But activity slackened in the Philadelphia and Richmond areas. And freight shipments slowed in the Cleveland and Atlanta regions.
Retail sales were “flat to moderately positive” in most areas. Purchases were stronger than expected in Kansas City, and back-to-school spending provided a lift in Philadelphia and Dallas. Sales of both new and used cars were robust in most regions. But traffic eased some in the Richmond and Atlanta areas.
“Retailers said consumers are slowly regaining confidence, but remain price-conscious and were largely limiting purchases to necessities and non-discretionary items,” the beige book says.
The assessment was more subdued than last week’s monthly retail sales report from the Commerce Department. The 0.6 percent jump in retail sales beat estimates, and marked the third-consecutive monthly increase.
Manufacturers and retailers have been hit by higher commodity and shipping costs lately but generally have not been able to pass them through to frugal customers, the report said.
Travel, meanwhile, picked up in San Francisco as a result of a brisk business and convention trade, while Minneapolis and Kansas City saw more tourists.
While hotel occupancy was still high in New York, “October bookings were somewhat weaker than expected.” Atlanta was still feeling the effects of the Gulf oil spill, but that led to increased tourist activity in northeast Florida, Georgia and Tennessee. The outlook for the rest of the year was “positive.”
Housing “remained weak.” Philadelphia saw a jump in existing home sales, while Richmond, Kansas City and Dallas saw sales of higher-priced homes tick up. But Atlanta home builders cited rising foreclosures and “downward price pressure” on prices.
Meanwhile, commercial real estate rents continued to fall, though apartment leasing has picked up recently.
While lenders remain tight-fisted, credit conditions improved in Chicago, and Richmond and Chicago lenders are more zealously competing for “quality loans.” But demand for commercial loans was still weak as businesses put off capital spending “because of economic and public policy uncertainties.”
Hiring, meanwhile, was still “limited.” Many firms are hesitant to hire, “given economic softness,” though demand for temporary workers continued to grow in some areas. Wages were stagnant, as “firms anticipated increased costs of employee benefits as a result of health care reform.”
Source: USA TODAY, a division of Gannett Co. Inc., Paul Davidson.