US Economic Growth Continues At Modest Pace

U.S. economic activity continued to rise modestly in September and early October, with growth picking up in several districts, according to a report released Wednesday by the Federal Reserve.

Several sectors in some districts, however, showed continued signs of sluggishness, the Fed’s latest beige book indicated.

Housing markets remained weak, with most of the Fed’s 12 regional districts reporting sales below those of a year ago, the Fed said.

“Home inventories were elevated or rising according to most District reports,” the Fed said.

The report comes as the Fed is widely expected by investors to announce new government bond purchases at its next meeting on Nov. 2-3 in a bid to boost the slowing recovery.

Minutes from Fed policymakers last meeting Sept. 21 showed most officials believing that the central bank needed to undertake new measures to boost growth, given that inflation remains too low and unemployment too high.

The U.S. central bank compiles the beige book eight times a year from anecdotal information collected by the dozen regional Fed banks scattered around the country. The report, which is based on interviews with businesses, economists and market experts, helps inform Fed officials as they decide the future course of monetary policy.

This latest beige book was prepared by the Federal Reserve Bank of Dallas, based on information collected on or before Oct. 8, and is prepared for the central bank’s next policy-setting meeting.

With the central bank concerned that inflation is too low, the beige book found that input costs increased slightly but were generally not being passed on to consumers in the form of higher prices for goods and services.

“Pass-through of rising input costs to final prices remained limited although there were scattered reports of increases,” the Fed said.

Most districts reported minimal wage pressure, though there were numerous reports from all the districts that firms expected health-care reform to increase the cost of employee benefits.

According to the beige book, retail spending was flat to up slightly in most districts, and retailers said that “consumers are slowly regaining confidence.” But the Fed also said that consumers are confining their purchases largely to must-buy items. Atlanta and Richmond districts were the exceptions to the generally positive trend; each suffered declining shopping traffic and sales, the Fed said.

“Looking ahead, retailers in several districts expected modest sales growth through year-end. In particular, some contacts in New York planned to add more holiday staff than last year,” the report said.

In most districts, new auto sales either held steady or grew. Sales of used vehicles were reported to be strong, with prices rising thanks to demand and lean inventories, the report said.

“Respondents’ outlooks were for slight growth in sales through year-end,” the Fed said.

Manufacturing continued to expand across most districts, with exports boosting activity in several regions.

But hiring by manufacturing firms “remained sluggish,” the Fed said.

A few districts saw improvement on the housing front, including Philadelphia, which reported an uptick in sales of existing homes. Richmond, Kansas City and Dallas districts also reported increased home sales in the higher price range.

Lending activity reported during the early fall remained at low levels, but “there were some reports that demand picked up slightly,” the Fed said. Richmond and Dallas both reported an uptick in lending activity.

“Some contacts noted there was pressure to price loans slightly more aggressively,” the Fed said.