Fed survey finds most of U.S. on growth track

— A pickup in consumer spending and steady home sales helped lift economic growth in October and early November in most parts of the United States, according to a Federal Reserve survey released Wednesday. The one exception was the Northeast, which was slowed by Hurricane Sandy.

Growth improved in nine of the Fed’s 12 regional banking districts, the Fed survey said. Growth was weaker in New York, Philadelphia and Boston — areas where Sandy caused widespread disruptions.

In the St. Louis district, which includes Arkansas, the Fed noted a moderate pace of economic expansion with retail and auto sales increasing compared with the same period a year ago.

The Fed said home sales increased throughout most of the St. Louis district. September year-to-date sales were up 15 percent in Louisville, 4 percent in Little Rock, 11 percent in Memphis and 14 percent in St. Louis.

A survey of senior loan officers in the St. Louis district reported little change in lending activity in the third quarter.

The survey noted that nationally growth improved despite nervousness about the “fiscal cliff.” That’s the name for automatic tax increases and spending cuts that could kick in next year if Congress and the Obama administration can’t reach a budget deal before then.

Hiring increased in more than half of the districts. But manufacturing shrank or slowed in seven regions and was mixed in two others.

The report, called the Beige Book, provides anecdotal information on economic conditions around the country from October through Nov. 14. The information collected by the regional banks will be used as the basis for the Fed’s policy discussion at the Dec. 11-12 meeting.

Many economists believe that the Fed could announce plans to buy more Treasury bonds at that meeting to replace a program set to expire at the end of the year. The goal of the program is to lower longterm interest rates and encourage more borrowing and spending.

The purchases would come on top of the Fed’s program to buy mortgage bonds, which is intended to lower mortgage rates and make home buying more affordable.

“Even if the fiscal cliff does happen, housing is still a bright spot, and this Beige Book confirms that,” said Guy Berger, a U.S. economist at RBS Securities Inc. in Stamford, Conn. “The economy has never really caught fire, and we still have the same weak spots like manufacturing slowing.”

Recent government and private reports show the economy improved in October and early November, even as Sandy halted business activity along the East Coast.

Employers added 171,000 jobs last month, and hiring in September and August was stronger than previously thought.

Rising home values, more hiring and lower gasoline prices pushed consumer confidence in November to the highest level in nearly five years. A better mood among consumers appears to have encouraged businesses to invest more in October after pulling back over the summer. And it could point to a stronger Christmas shopping season.

There are already signs that consumer optimism is leading to more spending. A record number of Americans visited stores and shopping websites over the four-day Thanksgiving weekend, according to a survey by the National Retail Federation.

Still, if lawmakers and the Obama administration fail to reach a budget deal soon, the threat of tax increases could make consumers more cautious in the final weeks of the year.

Many economists say worries about the fiscal cliff could be among a number of factors that keep growth in the October-December quarter below an annual rate of 2 percent. That’s too slow to make much of a dent in unemployment and could prompt the Fed to take further action at its next meeting.

Information for this article was contributed by Joshua Zumbrun and Jeff Kearns of Bloomberg News.

Business, Pages 27 on 11/29/2012

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