A U.S. economic revival gained strength in October and early November with “broadly based” improvements, the Federal Reserve said in its most optimistic assessment of business conditions in some time.
The central bank said Wednesday that in most parts of the country, sales were up and retailers were optimistic about the upcoming holidays. Not only that, residential housing continued to boom, it said, and even the nation’s beleaguered factories were seeing promising signs of a rebound at long last.
The Fed’s latest survey of “Current Economic Conditions,” compiled from reports submitted by its 12 regional banks, gave the most positive assessment of business activity since before the start of the 2001 recession and the lackluster recovery over the past two years.
“Descriptions of the pace of growth varied somewhat,” the Fed survey said. “But improvements seemed to be reasonably broadly based.”
The Fed survey will be used when central bank policy-makers hold their last meeting of the year on Dec. 9. The Fed is widely expected to hold a key interest rate at a 45-year low of 1 percent in an effort to bolster economic activity enough to convince businesses to begin rehiring laid-off workers.
The Fed survey found some hopeful signs on the jobless front, too, with layoffs slowing and demand rising for temporary workers.
“Labor market conditions generally stabilized after an extended period of weakness,” it reported.
The Fed survey, commonly referred to as the Beige Book for the color of its cover, was just the latest in a string of recent upbeat economic reports showing that the economy was continuing to improve at the start of the October-December quarter.
While analysts are not expecting economic growth to match the astonishing 8.2 percent pace of the July-September quarter, they are still looking for activity in the 4 percent-plus range. Bolstering that view, the government reported Wednesday that demand for “big-ticket” durable goods climbed at the fastest pace in more than a year in October while Americans’ income rose by a solid 0.4 percent.
The 2001 recession ended in November of that year, but up until recently growth has been so tepid that businesses have been hesitant to rehire laid off workers, especially in the manufacturing sector.
But the Fed survey found that manufacturing activity was improving in most districts, with Dallas, Boston, San Francisco and Minneapolis reporting rising demand for high-tech products, Atlanta and San Francisco reporting higher demand for building materials and Richmond indicating firms in “almost all sectors reporting higher shipments.”
In terms of consumer spending, which accounts for two thirds of total economic activity, many districts reported that demand for new fall clothing was held back by unseasonably warm weather in many parts of the country. However, most retailers were optimistic that holiday sales will turn out to be an improvement over the disappointing results of 2002.
Tourism, which has been hard hit since the 2001 terrorist attacks, showed moderate improvements this fall with early snows and cold conditions helping boost demand in ski areas in the San Francisco district while New York reported that occupancy rates in Manhattan hotels were up “noticeably” over a year ago.
Richmond reported that coastal areas were still recovering from the damage caused by Hurricane Isabel but that hotels and motels in mountain areas were booked almost to capacity for the Thanksgiving holiday. The Atlanta Fed reported strong demand in that region, with Florida cruise ships and amusement parks both reporting increases in activity.
The Fed has been able to keep interest rates low for an extended period because of an absence of price pressures. The central bank said that workers’ wages and consumer prices continued to be “fairly stable,” although there were some increases in raw materials prices and the cost of health insurance continued to surge.