Fed says consumer spending, auto sales boost US growth
WASHINGTON – The Federal Reserve says steady consumer spending and an improving housing market spurred modest U.S. economic growth in the late summer, though factory output was sluggish in part because of the strong dollar.
The Fed said Wednesday in its latest snapshot of the economy that nine of its 12 regional banks reported that growth was moderate or modest from mid-August through the beginning of October. Two banks said economic activity increased while the Kansas City Fed said the economy slowed slightly.
The Fed’s report echoes other recent data that suggests the U.S. economy, while still expanding, has run into headwinds from overseas and lost some momentum. Most analysts forecast that growth will fall sharply in the July-September quarter to an annual pace of about 1.5 percent from 3.9 percent in April-June.
The report, known as the beige book, will be used by Fed policymakers as a basis for discussing the economy’s health when they meet next on Oct. 27-28. The beige book is released eight times a year and consists of anecdotal reports from businesses in each of the 12 districts.
Fed Chair Janet Yellen has said the Fed may raise short-term interest rates before the end of the year should the economy continue to expand. Yet most analysts expect that if an increase does occur this year, it will happen in December rather than this month.
Americans generally boosted their spending, likely because of solid hiring in the past year that has put 2.8 million people to work. Auto sales were even stronger, particularly in the Richmond, Atlanta, Chicago and Dallas districts.
Hiring rose at a modest to moderate pace in nine of the 12 bank districts, the beige book said. The Boston Fed said that advertising and consulting firms were planning to add jobs, while manufacturers were laying off workers.
Yet even as job gains were steady, wage growth “remained subdued” in most regions, the Fed’s report said. Eight districts said that only slight to modest pay gains occurred from mid-August through early October.
Steep drops in oil and gas prices in the past year continued to weigh on many energy producers, which are still cutting jobs in Texas, the Dallas Fed said. Oil and gas drillers are also ordering less steel pipe and other equipment, dragging down factory output, according to many districts.
Manufacturers are also struggling because of the strong dollar, which has increased about 13 percent in value against a basket of other currencies in the past 12 months. That makes U.S. goods more expensive overseas and lowers the price of foreign goods in the United States, cutting into U.S. exports.