The economy “expanded at a modest to moderate pace” from late November through the end of December on increased holiday retail sales, demand for services and oil-and-gas extraction, the Fed said in its beige book business survey. At the same time, most industries saw “limited permanent hiring,” and the housing market remained “sluggish.”
The report may reinforce the views of a majority of Fed officials, who see an economy that is expanding without being strong enough to reduce joblessness as quickly as they would prefer. The unemployment rate dropped to 8.5 percent in December from 9.4 percent a year earlier. Fed officials are urging lawmakers to try more housing-aid programs.
“The reports on balance suggest ongoing improvement in economic conditions in recent months,” the Fed said in the report, which comes out two weeks before each meeting on monetary policy. “The combination of limited permanent hiring in most sectors and numerous active job seekers has continued to keep a lid on general wage increases.”
The beige book report reflects a “slightly better tone, slightly better data,” said Joseph LaVorgna, chief United States economist at Deutsche Bank Securities in New York. Even so, “the financial market has taken recent Fed commentary as generally dovish and as a signal that the Fed is perhaps exploring more easing measures.”
The last beige book, released Nov. 30, said the economy expanded at a “slow to moderate” pace in 11 of 12 districts, led by gains in manufacturing and consumer spending. St. Louis was the only region to report a decline in economic activity.
The Federal Open Market Committee will meet Jan. 24-25 in Washington as officials debate whether to try new actions to lower borrowing costs. Fed policy makers will for the first time publish projections for the benchmark federal funds rate and will also update their forecasts for economic growth, unemployment and inflation.
The beige book said that “upward wage pressures were modest over all” for workers across the country. The Labor Department said Jan. 6 that 200,000 jobs were added to payrolls in December, the most since September. The jobless rate declined for a fourth consecutive month to the lowest since February 2009.
Even so, the New York Fed president, William C. Dudley, said last week that the “outlook for unemployment is unacceptably high” and that it was appropriate for the Fed to consider steps to ease monetary policy.
The residential real estate market “largely held steady at very low levels” except for increasing construction of multifamily homes, the beige book said. The rental market tightened in some areas, the report said.
The Fed said in the report that inflation and pressures to raise prices were limited at the end of last year. Several district banks reported that “upward price pressures from rising commodity and input prices have eased substantially,” the Fed said.
Lending edged up on higher demand from businesses, with the New York and Cleveland regions reporting increased loans in commercial mortgages, the Fed said.
Consumer lending “was largely flat compared with the prior reporting period,” the central bank said.
A separate Fed report Jan. 9 showed that consumer borrowing in the United States rose in November by the most in 10 years. Credit increased by $20.4 billion, the biggest jump since November 2001, to $2.48 trillion.
Most regions said that holiday retail sales “were up noticeably over last year’s season,” and that consumer spending and confidence had improved, the Fed said.
Commercial and industrial loans from banks have increased to $1.34 trillion as of Dec. 28, the highest since October 2009, from $1.21 trillion a year earlier. They peaked at $1.62 trillion in October 2008.
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