VOL. 127 | NO. 42 | Thursday, March 1, 2012
All Areas of the Country Show Growth, Fed Reports
CHRISTOPHER S. RUGABER | AP Economics Writer
WASHINGTON (AP) – The U.S. economy started the year off well with busier factories, higher retail sales, more jobs and growth in home sales.
The Federal Reserve said Wednesday that all 12 of its banking districts reported some level of growth in January and the first half of February.
The Fed's report "was surprisingly more upbeat than we've seen lately," said Jennifer Lee, an economist at BMO Capital Markets. "The employment picture is certainly brighter."
Overall economic activity increased at a "modest to moderate" pace, the Fed noted. That roughly matches the Fed's assessment of the economy in the final weeks of 2011. And it is slightly better than the "slow to moderate" growth cited for October and mid-November.
The pickup in growth reported by each Fed region corresponds with stronger hiring and declining unemployment over the past three months.
The latest Beige Book, as the Fed report is formally known, sketched a picture of an economy improving in most major sectors:
- Manufacturing output rose in all districts. Auto manufacturing, steel makers and other metal producers all reported solid growth.
- Hiring rose slightly in many districts, with manufacturing employment picking up in six.
- Home sales increased in at least half of the districts, a notable improvement from the Fed's last report in January. Sales are expected to climb further in four districts. And six districts reported rising construction of apartments.
- Retail sales rose in seven districts. The Fed said there was optimism in many districts that "sales will improve" in the coming months.
Not all the news from the report was good. Some manufacturers expressed concerns about Europe's financial crisis. And most districts said employers were under little pressure to raise wages.
"On balance, the Beige Book was slightly more positive than the previous report but largely in line with economic data already reported over the past two months," said Joseph A. LaVorgna, chief U.S. economist at Deutsche Bank, in a note to clients.
Employers have added an average of 200,000 net jobs per month in November, December and January. That has pushed the unemployment rate down for five straight months, to 8.3 percent in January. Most economists are forecasting another big month of job growth in February.
Factory production jumped in January and December was the strongest month of growth in five years, the Fed said earlier this month in a separate report. Consumer confidence rose to its highest point in a year this month, as measured by the Conference Board.
Chairman Ben Bernanke acknowledged during a congressional hearing Wednesday that the economy has performed better than Fed expected. If it continues to do so, he said the Fed might have to reassess its outlook for a slow recovery. That could prompt the Fed to back off its plan to hold its key interest rate near zero until late 2014.
A spike in inflation could also force the Fed to reconsider that policy. Gasoline prices are rising again. Bernanke said that will likely push inflation up temporarily while depressing consumers' purchasing power.
"The policy is conditional," Bernanke said in response to a question on the topic. "It is based on what we know now."
The Beige Book is released eight times a year. Its findings from each of the Fed's regional bank districts are all anecdotal. There are no numbers. And each region offers a view unique to its particular economy.
For example, the New York Fed reports that Wall Street pay "remains under downward pressure," with bonuses down 30 percent from last year.
In Richmond, store managers at big box department stores said television sales "blipped up just before the Super Bowl."
The Atlanta Fed notes that cruise line reservations "have suffered in the wake of the maritime disaster in Italy," the Atlanta Fed reports. But "attendance for major conventions increased."
The outlook among auto dealers in the St. Louis District was positive: 76 percent expect sales to increase in March and April compared to the same months last year.
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