What happens next Where's my refund? Best CD rates this month Shop and save 🤑
BUSINESS
Philadelphia

Fed: Housing, autos pushing economy ahead

Paul Davidson
USA TODAY
People carry shopping bags along Broadway in New York City in December.

The housing and auto industries continued to support an economy that expanded moderately in most of the country last month, though holiday retail sales were mixed, according to a Federal Reserve report Wednesday.

The Fed's Beige Book, named for the color of its cover, shed little light on a job market that seemed to slow markedly in December, simply stating that two-thirds of the Fed's 12 bank districts reported increases in hiring. The Labor Department said last week that employers added a disappointing 74,000 jobs in December, far below the 200,000 forecast by some economists.

Yet official government data highlighted an economy that was generally shifting into a higher gear last month, with manufacturing output, exports, business investment and consumer spending picking up.

The Beige Book, which provides an anecdotal snapshot of the economy, said nine districts expanded moderately from late November through December. The Boston and Philadelphia regions grew modestly while the economy was unchanged in Kansas City. The economic outlook, though "is positive in most districts," the report said.

Holiday sales were "on plan or up a bit" vs. 2012 in most regions. The Richmond area, however, cited "a general slowdown in retail spending" while the Kansas City region reported lower than expected holiday purchases as a result of a shorter sales season and inclement weather.

Clothing sales surged in the Boston and Richmond regions, and cold-weather items were hot sellers in Philadelphia, Cleveland and Chicago. Meanwhile, the housing recovery continues to boost retailers, with home furnishings moving briskly in the Boston, Philadelphia, Richmond and San Francisco areas.

Car sales, which have helped underpin the recovery, remained strong in Richmond, Atlanta and San Francisco but flagged in New York, Philadelphia and Kansas City. Still this year's outlook for vehicle sales was strong in numerous areas, the report said.

Leisure and tourism was mixed. Hotel bookings were strong in Atlanta, but slow in Richmond and travel and tourism slipped in Hawaii and Las Vegas.

Manufacturing appeared to hold up better than other sectors, with 11 of the 12 districts reporting "both growing sales and an optimistic outlook." Production in commercial aviation, autos and construction materials was especially strong. In the Cleveland area, most auto suppliers were at or near capacity.

A Dallas manufacturer said his company had "too many jobs to bid on" for the first time since the recession. A particular bright spot is that capital spending, which had been sluggish until recently, was up and businesses are anticipating further growth.

But in a sign that business investment was still somewhat crimped by a climate of uncertainty, one Cleveland contact said 85% of auto suppliers "should be adding capacity right now but indicated that many are reluctant to do so."

Defense-related production, a casualty of federal spending cuts last year, was weak. But Cleveland area contacts voiced hope that the recent budget deal, which eases the cuts, "would provide a boost to defense contractors."

The housing recovery continued apace, with home sales rising in most districts. Sales, however fell in the Atlanta, Cleveland and Kansas City districts.

Commercial real estate, which generally has lagged the housing recovery "contained much good news," the Fed said. Commercial leasing picked up in New York City, and the Atlanta, Chicago, St. Louis, Minneapolis and San Francisco regions and investment and construction activity also accelerated in several areas.

The recent rise in mortgage rates continued to dampen refinancing in the New York, Cleveland, Atlanta, Chicago and Kansas City areas. But loans for home purchases held steady.

In several districts, wages rose slightly to modestly, continuing a trend since the end of the recession in 2009. In Minneapolis, however, "labor markets were showing signs of tightening, and wage increases were moderate."

Featured Weekly Ad