Economic Growth Slowed in Recent Weeks-Fed (see Beige Book Link)
Reuters Business Report
Wednesday September 11, 1:03 pm ET
By Tim Ahmann
WASHINGTON (Reuters) - U.S. economic growth slowed in recent weeks, although activity varied widely by
sector, the Federal Reserve said on Wednesday in a report underscoring the patchy nature of the recovery.
"Most districts indicated slow and uneven
economic growth, with mixed or scattered
experiences across sectors of the economy,"
the Fed said in its so-called beige book, an
anecdotal snapshot of economic conditions
across the nation.
The report, compiled by the Federal Reserve
Bank of St. Louis with information collected
before Sept. 3, found an uneven performance
among retailers in late July and August, and
said manufacturing activity was "sluggish."
In addition, most of the 12 regional Fed bank
districts reported little or no gain in employment,
although three noted increased demand for
temporary workers.
The beige book, a compilation of material from
each Fed district, will be used by officials when
they gather on Sept. 24 to discuss interest rates.
At that meeting, the Fed, which slashed interest rates 11 times last year to combat economic weakness, is widely
expected to leave the benchmark overnight lending rate at the 40-year low of 1.75 percent, which it reached last
December.
The report said auto sales rose above year-ago levels "mostly due to aggressive financing and rebate
incentives," but it presented mixed messages from other retailers.
Three districts found warm weather curbed apparel sales, while three said sales of back-to-school sales were
strong and a fourth said they were disappointing.
"Overall, retailers are cautiously optimistic about the fall, expecting sales to be flat or slightly up from their 2001
levels," the Fed said.
However, it said manufacturers were still struggling.
"On the whole, manufacturing activity was sluggish, with a good deal of variation by industry and region," it said,
offering signs of strength in autos and steels but weakness among the high-tech and building materials industries.
The report found inflation well-contained, saying both consumer prices and business input costs "increased
slightly or remained flat."
Still, businesses were not without worries on the cost front.
"Despite few signs of pressures on wages, there was widespread concern about the effect that rising health
care costs might have on labor costs," the report said.
The report said home-building and buying were strong, but commercial real estate markets were weak. It also said
demand for mortgages and refinancings was robust, in contrast with softness in business lending.
The picture painted by the beige book fits in with other recent economic reports showing strong activity in some
areas -- notably housing and autos -- but weakness elsewhere.
Markets largely shrugged off the report, taking the view that it offered few new clues on the direction of Fed
policy.
Most economists think the next move on rates will be up -- although perhaps not until well into next year -- but
some believe the central bank could cut rates again to boost a sluggish economy struggling under the weight of a
massive stock-market decline.
However, a number of Fed officials have recently suggested they see little need for further rate cuts. Indeed,
policymakers, in announcing their decision to hold rates steady after their last meeting on Aug. 13, said the current
low level of rates should prove sufficient to underpin growth, even as they said economic risks were to the
downside.
Fed Chairman Alan Greenspan may offer some further clues on the direction of interest rates on Thursday when
he testifies on the economy before the House of Representatives Budget Committee. His testimony is slated for 10
a.m. (1400 GMT).
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Beige Book Summary Link:
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federalreserve.gov
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More commentary:
msnbc.com |
