WASHINGTON – The U.S. economy kept expanding in October and November, helped by solid gains in consumer spending, manufacturing and overall employment, according to the Federal Reserve’s latest survey of business conditions around the country.
The Fed survey found many areas of strength and for the first time this year, the report did not see a need to qualify growth by using words like “modest” and “moderate.”
The Fed said that business executives remain optimistic about the prospects for growth in 2015. The gains in economic activity were coming as overall inflation remained subdued although the report did find upward wage pressures for some skilled workers.
The report, known as the Beige Book for the colour of its cover, will form the basis for discussion at the Fed’s final policy-making meeting of the year on Dec. 16-17.
The comments in the report suggest the Fed will leave a key short-term interest rate at a record low for the time being. The rate has been near zero since December 2008. Many private economists believe that the economy will be growing strongly enough and unemployment will be low enough that the central bank will begin raising rates in the middle of 2015.
Much of the optimism reflected reports of solid consumer spending, which the Fed said reflected in part the fact that gasoline prices have fallen, giving households more money to spend on other items. In addition, an early cold spell in parts of the country spurred sales of winter clothing.
The report said auto sales were particularly strong in the Richmond, Atlanta, Chicago and San Francisco districts with lower gas prices boosting sales of SUVs and light trucks in the Philadelphia, Cleveland and Chicago districts.
Manufacturing showed gains in most districts with the automotive and aerospace industries continuing to be sources of strength. Steel production was up in the Cleveland, Chicago and San Francisco districts while manufacturers of heavy machinery in the Chicago district reported improvements in sales of construction machinery but continued weakness in demand for farm and mining equipment.
High-tech manufacturers in the Boston, Dallas and San Francisco districts reported steady growth in demand with revenue from biotech industries increasing in the San Francisco district.
Home construction was mixed with only about half of the districts reporting increases in home sales. Construction of non-residential projects was up in most districts, however, with office building relatively strong in large urban areas such as New York City and Philadelphia.
Employment gains were widespread across the country in October and November with Boston reporting increases in the software and information technology sectors while New York found financial firms, which suffered heavy layoffs following the 2008 financial crisis, were hiring more workers.