Fed survey: Holidays, auto sales, housing boost economy
WASHINGTON — Holiday shopping, strong auto sales and a recovering housing market helped boost the U.S. economy from the middle of November through early January, according to a Federal Reserve survey released on Wednesday.
The Fed said 12 of its regional banking districts reported “modest or moderate” growth in the final weeks of 2012. Of those, only St. Louis said growth had slowed from the previous survey, for October through early November.
Consumers increased spending at the end of the year in every district. Auto sales were steady or stronger in 10 districts. Nearly all of the districts reported increases in home construction and home sales.
Still, employers in some parts of the country delayed hiring because of uncertainty over the fiscal cliff. Congress and the White House reached a deal on Jan. 1 to prevent sharp income tax increases from hitting most Americans. But they put off decisions on government spending cuts.
The report, called the Beige Book, provides anecdotal information on economic conditions through Jan. 4. Overall, analysts said the survey showed the economy looked better at the end of the year.
“Despite concerns about the dreaded fiscal cliff, the economy looks to have improved slightly in recent months,” said Sal Guatieri, senior economist at BMO Capital Markets. He said the latest survey probably had not fully captured the improvement in business sentiment that has occurred with the January deal to avoid most income tax increases.
Congress must still decide what to do about automatic spending cuts that are now set to take effect in March.
The survey showed that companies in six districts — Boston, Richmond, Atlanta, Chicago, Kansas City and San Francisco — held off on hiring because of those looming cuts. Many of the companies are in the defense industry, which is slated for some of the cuts.
The information collected for the Beige Book survey will be used as the basis for the Fed's policy discussion at the Jan. 29 and 30 meeting. Many economists believe the Fed will take no new steps at its January meeting.
The Fed last month said it planned to keep its key short-term interest rate at a record low even after unemployment falls close to a normal level — which it said might take three more years. And it said it would keep buying $85 billion a month in Treasurys and mortgage bonds to try to keep borrowing costs low and encourage more spending.
The economy has shown some signs of improvement, according to recent government and private data.
U.S. automakers finished 2012 with their best sales in five years. The housing recovery has helped lift home prices in most parts of the country. Retail spending grew in December from November, led by higher sales of cars, furniture and clothing. And factory output has increased in the past two months.
Job growth has been modest but steady. In December, employers added 155,000 jobs, roughly matching the monthly average in 2011 and 2012.
Still, unemployment remains high at 7.8 percent. Wages are barely increasing. And many consumers are likely to pull back on spending at the start of the year because lawmakers and President Barack Obama allowed a two-year reduction in Social Security payroll taxes to lapse.
Most Americans will start seeing less money in their paychecks this month. A person earning $50,000 a year will see take-home pay shrink by roughly $1,000 in 2013. That's likely to slow consumer spending and weigh on economic growth.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Signs of steady U.S. economy: Pay, home sales up, unemployment applications down
- Smartphones expected to overtake desktops for holiday shopping
- Nutritional supplement makers, led by GNC, want to create voluntary safety standards
- Many Black Friday deals not worth the hassle
- Stocks finish flat before Thanksgiving holiday; energy firms give back some gains
- Take steps to make it harder for holiday hackers
- Covestro leader MacCleary finds stability amid change
- Union leaders warn Post-Gazette newsroom of possible layoffs
- German financial giant Allianz SE slashes coal investments
- QVC blazes trail as mobile retail giant
- Holiday festivities help merchants in Western Pennsylvania