The Federal Reserve said the economy gained strength across much of the U.S. as hiring improved, manufacturing expanded and retailers anticipated a stronger holiday shopping season.
Five Fed banks, including Boston and San Francisco, said the economy grew “at a slight to modest” rate, while five others, including New York and Chicago, reported a “somewhat stronger pace of economic activity.” Conditions were reported as “mixed” in the Philadelphia and St. Louis regions.
The report, based on anecdotal information, signals an improvement in the economy after sluggish growth in the summer prompted the Fed last month to announce $600 billion in asset purchases to help cut unemployment persisting near 10 percent.
The positive outlook from 10 banks contrasts with the October report in which eight Fed banks, including San Francisco and Chicago, reported growth. At the time, the Philadelphia and Richmond Fed banks said their economies were “mixed” while the Cleveland region “held steady” and the Atlanta district “remained slow.”
The Beige Book report released today reflects information collected on or before Nov. 19 and summarized by the Cleveland Fed. The survey will be considered by Federal Open Market Committee policy makers before their next meeting on Dec. 14, when they will review their asset purchase program.
The Fed’s Nov. 3 decision to undertake new bond purchases sparked a political backlash. Last month, two Republicans, Tennessee Senator Bob Corker and Indiana Representative Mike Pence, proposed removing the Fed’s full employment mandate to focus the central bank on stable prices alone. Corker plans to introduce legislation next year.
‘Pace of Recovery’
At its November meeting, the Fed said “the pace of recovery in output and employment continues to be slow” and that household spending remains constrained by “high unemployment, modest income growth, lower housing wealth, and tight credit.”
“Hiring activity showed some improvement across most Districts,” the report said today, adding that “employers are waiting for clearer signals of expanding business prospects before adding significantly to payrolls.”
The Labor Department will report Dec. 3 that the economy added 145,000 jobs in November, according to the median forecast of a Bloomberg survey of 80 economists. The unemployment rate will remain unchanged at 9.6 percent, they estimate.
Eight Fed districts reported improving retail spending. Boston, Cleveland, St. Louis and Richmond said results were mixed. “Expectations for the holiday shopping season were generally positive,” the report said.
Consumer confidence rose in November to the highest level in five months, the New-York-based Conference Board said this week.
The average shopper in the U.S. spent 6.4 percent more over Thanksgiving weekend than last year as more people picked up jewelry and toys at the start of the holiday season. About 212 million shoppers went to stores and websites over the weekend, on average spending $365.34, according to the National Retail Federation.
“Housing markets remain depressed, with several Districts reporting further weakening during the past six weeks,” the Fed said.
Last month the National Association of Realtors said home purchases dropped 2.2 percent to a worse-than-expected annual rate of 4.43 million. Sales of new homes remain depressed as well, the Commerce Department said last month. New home sales in October of 283,000 at an annual rate were only slightly higher than the all-time low of 275,000 in August.
Wage pressures were “contained” and prices “were fairly stable across Districts despite rising input costs, especially for agricultural commodities, metal, and fuel,” the Fed said.
The Fed’s preferred gauge of inflation, the personal consumption expenditures index, excluding food and energy, rose 0.9 percent in October from a year earlier, the lowest rate of inflation in data going back to 1960. Including food and energy, prices rose 1.3 percent, below the goal of “2 percent or a bit below” that Bernanke expressed in an October speech in Boston.
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