The Federal Reserve said today that the U.S. economy was expanding “modestly” last month, supported by improvements in housing and auto sales, even as the labor market showed little change.
“Consumer spending was generally reported to be flat to up slightly since the last report,” the Fed said in its Beige Book business survey, which is based on accounts from the 12 district Fed banks. Conditions in manufacturing were “somewhat improved,” according to the report, which provides anecdotal evidence on the health of the economy two weeks before the Federal Open Market Committee meets in Washington on Oct. 23-24.
The Beige Book provides support for Fed Chairman Ben S. Bernanke’s view that economic growth isn’t strong enough to bring about a quick healing of the labor market. A Labor Department report last week showed that while the unemployment rate unexpectedly declined in September, payroll growth slowed.
The Fed on Sept. 13 announced a third round of quantitative easing, with purchases of $40 billion a month of mortgage debt, and said its benchmark interest rate was likely to stay low through the middle of 2015.
The report’s description of the economy is not as positive as Beige Books earlier in the year, which used the word “moderate” to describe the pace of expansion, said Dana Saporta, U.S. economist at Credit Suisse Group AG in New York. “In Fed parlance, modest is a step down from moderate,” she said.
Stocks remained lower after the report. The Standard & Poor’s 500 Index was down 0.7 percent to 1,431.82 at 2:49 p.m. in New York.
While “employment conditions were little changed since the last report,” several districts reported shortages of highly skilled workers, the Beige Book said.
The New York district reported economic activity had “leveled off” and Kansas City indicated “some slowing in the pace of growth.” The Fed said that “in general, other districts reported that growth continued at a modest pace.”
The housing market showed “widespread improvement since the last report,” according to the Fed with all twelve districts reporting that “existing home sales strengthened, in some cases substantially.”
The Fed’s previous Beige Book report said six districts reported “modest” growth, while three called it “moderate.” The Philadelphia and Richmond Feds said growth was slow in most industries while manufacturing declined. The Boston Fed cited “some slowdown.”