Fed report shows strong housing, auto sales caused boost in the economy
WASHINGTON -- A strengthening housing recovery and robust auto sales contributed to moderate growth across the United States in late February and March, according to a Federal Reserve survey released Wednesday.
All of the Fed’s 12 banking districts grew moderately and growth accelerated in two districts -- New York and Dallas -- from January and early February.
The survey suggests the economy performed better in March than recent government data on hiring and consumer spending indicated. That could mean the weakness may be temporary.
The Fed survey, which is based on anecdotal reports, found hiring was unchanged or improved slightly compared with the previous report. And it noted that consumer spending grew modestly. But the report also said higher taxes and a spike in gas prices slowed sales.
By contrast, the Labor Department said earlier this month that hiring slowed sharply in March. And retail sales declined last month by the most in nine months, a separate report said last week.
The survey said the recovery in home construction is gaining momentum and creating more construction jobs. It is also boosting factory output of housing-related goods, such as lumber.
There were some weak spots. Several districts said manufacturers of defense-related goods had cut jobs, in response to steep government spending cuts that took effect March 1.
The report, called the Beige Book, provides an overview of economic conditions that existed from February 22 through April 5. The information will be discussed along with other economic data during the Fed’s next policy meeting April 30-May 1.
Most analysts expect the Fed will maintain its low interest rate policies at that meeting but take no new steps. The Fed is expected to stick with plans to keep short-term interest rates at record lows at least until unemployment falls to 6.5 percent. And it will likely continue purchasing $85 billion a month in Treasury and mortgage bonds to lower long-term rates and encouraging more borrowing.
Debate has heated up among Fed policymakers about when to rein in the bond-buying program, which began last fall. At their last meeting on March 19-20, a majority of Fed officials said they supported continuing the bond purchases at least through the middle of the year. But many members indicated they wanted to wind down the program before the end of the year, as long as hiring and the economy continued to improve.
Since that meeting, however, some key government reports have suggested the economy weakened in March.
Employers added only 88,000 jobs in March, a sharp slowdown from average gains of 220,000 in November through February. And consumers cut back on their spending at retail stores and restaurants last month, a sign that higher Social Security taxes have made more Americans cautious about spending.
Still, reports on housing and autos continue to signal strength.
In March, builders broke the 1 million mark on homes started for the first time since June 2008. The increase in the seasonally adjusted annual rate was fueled by a surge in apartment construction.
And U.S. auto sales rose to 1.45 million in March, their highest level since August 2007. Car sales fell slightly from last March but pickup truck sales jumped 14 percent.
Economists forecast that the economy grew at a 3 percent annual rate in the January-March quarter, a healthy rebound from a weak 0.4 percent increase in the fourth quarter. But most now expect growth will slow sharply to about 1.5 percent in the April-June quarter.
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