The pace of U.S. economic activity continued to pick up in most of the country in late November through early January, the Federal Reserve said Wednesday.
But one of 12 Federal Reserve districts — Cleveland, in the nation’s manufacturing heartland — characterized economic activity in its region as mixed.
“Eleven districts characterized activity as expanding, with Atlanta, New York and Richmond noting that the pace of activity had quickened since their last reports,” said the central bank’s beige book, a summary of economic conditions.
The Fed said that consumer spending was generally higher in the six weeks since it issued its previous beige book summary on Dec. 1, and many districts reported stronger holiday sales than a year ago.
The Fed said inflationary pressures remained largely in check and while some manufacturing costs continued to rise slightly, “price increases for final goods and services were generally modest.”
The Richmond Fed prepared the beige book based on data collected before Jan. 10. Members of the Fed’s policy-setting Federal Open Market Committee will use the information at their Feb. 1-2 meeting, where they are widely expected to nudge interest rates up by a quarter percentage point for a sixth consecutive time.
Labor markets were generally firmer in late 2004, the Fed said, with a few districts having to offer higher wages for some skilled workers.
“Cleveland noted that in response to the strong pickup in shipping demand, trucking firms have been attempting to expand their workforce by raising their wage rates and offering nonpecuniary incentives,” the beige book said.
“Kansas City also noted higher wages for skilled factory workers in short supply, while Richmond noted that wage increases picked up in the services sector,” the Fed said.
Nine out of the 12 Fed districts said that manufacturing activity had strengthened as 2004 ended. There were a few exceptions, including in Richmond, where textile and apparel shipments declined and in Atlanta, where a computer circuit board maker laid some employees off.
On balance, however, manufacturers said they expected conditions to remain positive in coming months and most said that capital spending will increase in 2005. The Richmond Fed reported that “some manufacturers expressed skepticism about the sustainability of the U.S. economic recovery” but still planned higher spending over the next year.
The beige book said that residential real estate activity remained strong and that commercial real estate activity strengthened in most districts.
“Office leasing was especially brisk in Washington, D.C., and New York City, two of the nation’s strongest commercial markets,” the Fed said.
