Friday, December 7, 2012

THE ECONOMY: Fed Survey Shows Economy Improving in Most Regions

WASHINGTON — A pickup in consumer spending and steady home sales helped lift economic growth in October and early November in most parts of the United States, according to a Federal Reservesurvey released Wednesday. The one exception was the Northeast, which was slowed by Hurricane Sandy.
The New York Times
Growth improved in nine of the Fed’s 12 regional banking districts, the survey said. Growth was weaker in New York, Philadelphia and Boston — areas where the storm caused widespread disruptions.
The survey noted that growth improved despite nervousness about the automatic tax increases and spending cuts that could kick in next year if Congress and the Obama administration cannot reach a budget deal before then.
Hiring increased in more than half of the districts. But manufacturing shrank or slowed in seven regions and was mixed in two others.
The report, called the Beige Book, provides anecdotal information on economic conditions around the country from October through Nov. 14. The information collected by the regional banks will be used as the basis for the Fed’s policy discussion at the Dec. 11-12 meeting.
Many economists say they believe that the Fed could announce plans to buy more Treasury bonds at that meeting to replace a program set to expire at the end of the year. The goal of the program is to lower long-term interest rates and encourage more borrowing and spending.
In another economic report Wednesday, the Commerce Department said sales of new homes fell slightly in October, and September sales were slower than initially thought. The October sales pace was dragged lower by steep declines on the East Coast, partly related to the storm.
New-home sales dipped 0.3 percent in October to a seasonally adjusted annual rate of
368,000. That was down marginally from the 369,000 pace in September, which was revised lower from an initially reported 389,000.
Sales fell a sharp 32.3 percent in the Northeast and nearly 12 percent in the South. The government said the storm had a minimal effect on the housing data because it made landfall in the final days of the month.
States outside the area affected by the storm fared better. Sales surged 62.2 percent in the Midwest and were up 8.8 percent in the West.
Sales were still 17 percent higher in October than the same month in 2011. Even with the gain, new-home sales were well below the annual rate of 700,000 that economists consider healthy.
“Over the past 18 months, new-home sales have been on the gentle rising trend although they remain at a very depressed level,” said Steven Wood, chief economist at Insight Economics.
Though new homes represent only a small portion of the housing market, they have a disproportionate impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to statistics from the National Association of Home Builders.

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