Fed survey shows economic recovery uneven
WASHINGTON (AP) – The nation’s economic recovery progressed at a modest pace in late April and May, although improvements were spotty, the Federal Reserve said Wednesday in its latest snapshot of business activity around the country. “The tone was one of modest but uneven growth, with some major sectors showing signs of improvement while others softened or remained weak,” the Fed said in its survey.
For the most part, manufacturers – hardest hit by last year’s recession – reported higher production levels, shipments and orders, but there were pockets of weakness. Suppliers of aircraft parts in Boston and San Francisco said orders were down. Manufacturers in Philadelphia, Atlanta, Dallas and San Francisco said demand for telecommunications equipment remained weak.
Retail sales were flat in most districts, hampered by unusually cool weather in some parts of the country. Automobile sales were mixed.
On the real-estate front, home sales generally remained robust, as low mortgage rates motivated buyers. But commercial properties continued to struggle, with most districts reporting high vacancy rates and lower rental rates.
The jobs market, meanwhile, was sluggish, though the Boston, Philadelphia, Richmond and Atlanta districts reported higher demand for temporary workers, an encouraging sign for future job growth.
The Fed survey is based on information collected before June 3 from the Fed’s 12 regional bank districts. It will be used by Fed policy-makers when they meet June 25-26 to discuss interest rate policy. Most economists predict the Fed will leave short-term interest rates – now at 40-year lows – unchanged through the summer.
One of the reasons the Fed can afford to leave rates so low is because inflation hasn’t been a problem. In the survey, the Fed said “price pressures were in check for most goods and services.” But business contacts reported rising steel prices and continued increases in energy and insurance costs.
Earlier this month, Fed Chairman Alan Greenspan observed that America’s economic prospects were looking brighter, but cautioned that economic growth in the coming months will slow from the sizzling 5.6 percent pace posted in the January-March quarter.
Private economists are forecasting growth in the current quarter of around 3 percent to 3.5 percent, a more moderate, but still respectable pace.
One of Greenspan’s biggest concerns is how consumer spending, which accounts for two-thirds of all economic activity in the United States, will hold up during the recovery. Throughout the slump, consumers kept on buying, meaning they’ll have less pent-up demand coming out of it.
And, although the nation’s unemployment rate dipped to 5.8 percent in May, many economists predict it will move higher this summer, another factor that might damp spending.
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