Fed Beige Book: US economy's on the improve

We’re sorry, this feature is currently unavailable. We’re working to restore it. Please try again later.

Advertisement

This was published 14 years ago

Fed Beige Book: US economy's on the improve

The US economy improved in 10 of the Federal Reserve’s 12 districts last month, marking a broadening of the recovery, the central bank said today.

"While economic activity remains at a low level, conditions have improved modestly further," the Fed said in its Book business survey, published two weeks before the Federal Open Market Committee meets to set monetary policy. The Philadelphia and Richmond Fed districts reported "mixed conditions".

The book offers anecdotal evidence that will help central bankers weigh developments in an economy where unemployment is projected to remain above 10 percent through the first half of the year. Policy makers, who next meet January 26-27, last month repeated a pledge to keep borrowing costs "exceptionally low" for an "extended period".

Most district banks reported that holiday-season consumer spending was "slightly greater" in 2009 than the year before, while remaining “far below” levels of 2007, according to the report, which reflects information collected through January 4. Manufacturing improved or held steady in most districts, while the labor market and loan demand remained weak.

The Standard & Poor’s 500 Index rose 0.6 per cent to 1142.93 in New York. The yield on the 10-year Treasury note was up eight basis points to 3.79 per cent.

'Picking Up'

The report "suggests the economy is very gradually gaining steam," said Zach Pandl, an economist at Nomura Securities International Inc in New York. "The risks of a dip back into recession are declining."

Employers unexpectedly cut 85,000 jobs in December, the Labor Department reported on January 8, and the jobless rate was unchanged at 10 per cent, close to a 26-year high. Payrolls have declined by more than 7.2 million since the recession began in December 2007.

Thomas Hoenig, president of the Fed Bank of Kansas City, said December’s job losses didn’t change his outlook for a "modest" and "persistent" recovery. Hoenig, speaking in a Jan. 11 interview with Bloomberg Radio, forecast growth of 3 per cent to 3.5 per cent this year.

Advertisement

Consumer confidence is increasing as companies slow the pace of job cuts and stocks rise. Retailers including TXJ and Sears Holdings reported improved sales over the holiday shopping season.

Sales climbed 14 per cent in December at TJX Cos.’ stores open at least a year, beating the 5.9 per cent average of analysts’ estimates compiled by Retail Metrics Inc. Sears posted a sales gain and issued a profit forecast that topped analysts’ projections.

Price Sensitive

"Consumers were variously described as cautious, price sensitive, and focused on necessities, but sometimes willing to spend on discretionary purchases," the Book report said.

Loading

The labour market "remained soft" in most districts, the report said. That kept wage and price pressures "subdued" in all but the Boston and Minneapolis districts, which reported some increases. Hiring of temporary workers through staffing firms was reported higher in New York, Cleveland, Chicago, and Dallas.

Bloomberg

Most Viewed in Business

Loading