Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, December 9, 1993 TAG: 9312090075
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
"Reports were generally more optimistic than those of this summer," the central bank said in its "Beige Book," a look at regional business activity.
The Fed noted that California continues to suffer economically and conditions in the Northeast are mixed. But overall the economy "continued to expand at a moderate pace," it said.
That's an improvement over the "slow to moderate" phrase used by the Fed since June. Such slight changes in wording are regarded by economists as important hints of the central bank's thinking.
The report also reflected slightly more concern about inflation than previous assessments.
It said "wage increases and prices for final goods generally were said to be stable." But it noted that the Chicago district bank reported signs that increases in raw materials prices were becoming more common. The Boston and Richmond banks said some manufacturers have raised prices.
Economists said the report, coupled with recent remarks of top Fed officials, lays the groundwork for the Fed to make a small increase in short-term interest rates to squelch any possibility of more inflation. A key rate set by the Fed, the rate charged among banks for overnight loans, has remained at a three-decade low of 3 percent for 15 months.
Fed Vice Chairman David Mullins said Tuesday the central bank should tighten monetary policy before the increased consumer activity results in accelerating inflation. He did not say exactly when that would happen, but many economists expect a move in the first quarter, some as early as January.
"We're closer to the day when the Fed will begin tightening again," said economist Mark Zandi of Regional Financial Associates in West Chester, Pa. ". . . They want to be out ahead of any significant inflationary pressures."
Wednesday's report summarized anecdotal material collected before Nov. 29 by the Fed's 12 regional banks. It will be used by monetary policy-makers at their next meeting on Dec. 21.
Overall economic growth, which slumped to 1.4 percent in the first half of the year, improved to 2.7 percent in the third quarter and is expected to approach 4 percent in the fourth.
The Fed report said consumer spending picked up in most parts of the country, particularly for autos and other durable goods such as appliances.
"The holiday shopping season got off to a good start over the long Thanksgiving weekend, with sales at or exceeding expectations," it said.
Manufacturing activity was improving most places "but few businesses reported new hiring."
Residential real estate was reported strong and even long-moribund commercial real estate markets "have begun to show a few signs of improvement," it said.
by CNB