March 6, 2021

Consumers in Many Areas Spent More, Fed Reports

The Fed said five of its regions, Dallas, Kansas City, Minneapolis, San Francisco and St. Louis. reported modest or slight growth in late July and August. The seven other regions described growth as subdued, slow or sluggish.

The survey, known as the beige book, offers mostly anecdotal information on economic conditions. Its findings were a slight improvement from the previous survey, which said growth slowed in eight of the 12 regions in June and early July.

Consumer spending increased in most regions from the previous survey. But the gains were mostly a result of stronger auto sales. Demand for other products was flat or fell in several regions during late July and August.

The report offered little guidance about future hiring. It noted that several districts had said the volatile stock market and economic uncertainty had led many businesses to lower expectations for the near future. The Dow Jones industrial average lost 1,962 points, or roughly 15 percent, from July 22 through Aug. 10.

Although far from upbeat, the overall tone from the anecdotal evidence “wasn’t all doom and gloom,” said Jennifer Lee, senior economist at BMO Capital Markets.

The regional outlook will help shape the discussion at the central bank’s next meeting on Sept. 20-21.

The economy barely grew in the first half of the year, and the government said last week that employers stopped adding jobs in August.

Consumers and businesses are feeling less confident after a turbulent summer. Lawmakers fought over raising the federal borrowing limit, Standard Poor’s downgraded long-term United States debt, and stocks have fluctuated wildly after plunging in late-July and early August.

Manufacturing slowed in many parts of the country, including New York, Philadelphia and Richmond, the survey noted. Textile makers in Richmond said that their markets had grown weaker because of declines in consumer confidence.

Home sales slowed in many districts, although Atlanta, Boston, Dallas and Minneapolis said sales had improved slightly compared to last summer’s weak levels.

Some economists say the Fed must act to help the economy avoid another recession.

On Aug. 9, the Federal Reserve said it planned to keep interest rates very low until at least mid-2013, assuming the economy remained weak. Minutes from that meeting showed some Fed officials had pushed for more aggressive steps.

One possibility is the Fed could increase the percentage of long-term Treasury securities it keeps in its mix of holdings. That approach would have the advantage of exerting downward pressure on long-term interest rates without adding to the Fed’s already record-level of securities.

Still, three regional bank presidents dissented from the Aug. 9 decision. They expressed concerns that the Fed’s policies were contributing to higher inflation.

The worsening jobs outlook has also put pressure on President Obama. He is expected on Thursday to introduce a $300 billion jobs package before a joint session of Congress. The plan is likely to include extensions of the payroll tax cut and long-term unemployment benefits, tax incentives for businesses that hire and money for public works projects.

The effort faces strong opposition from Republicans in Congress, who say Mr. Obama’s previous stimulus program failed.

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