WASHINGTON – Economic growth held steady across the United States from July through late August, as Americans bought more cars and homes and auto factories added workers.
A Federal Reserve survey released Wednesday showed that all 12 of the Fed’s regional banking districts reported modest to moderate growth. That’s roughly in line with the Fed’s previous survey of those districts from late May through early July.
Attractive financing options helped boost demand for new cars and trucks in most districts, with many reporting robust sales.
The survey, known as the beige book, said that job growth was steady and that hiring in manufacturing improved modestly, especially at auto and auto-parts factories. But the Kansas City and San Francisco districts said federal spending cuts had caused production cutbacks at some defence plants.
The beige book is based on anecdotal reports from businesses gathered by the Fed’s regional banks. The information was gathered for the Fed’s next meeting on Sept. 17-18.
The overall economy grew at a modest annual rate of 2.5 per cent in the April-June quarter. Many analysts believe that growth in the July-September quarter will be around an annual rate of 2 per cent to 2.5 per cent.
Some economists believe growth and hiring are strong enough for the Fed to begin slowing its bond purchases at the September meeting. Others say the Fed may hold off at that meeting because they want to see more data. The $85 billion a month in purchases of Treasury and mortgage bonds have kept long-term interest rates low.
Low rates have encouraged more people to buy cars, trucks and homes this year. That helped the auto industry in August to its best sales in six years. On Wednesday, Toyota, Ford, Nissan, Chrysler and General Motors all reported double-digit sales gains for August, led by strong sales of pickup trucks and small cars.
The Fed survey found that dealerships across the country were optimistic about sales of both new and used cars for the rest of this year. Several districts also noted modest growth in manufacturing activity, including Philadelphia, Richmond, Atlanta, Chicago, Kansas City and San Francisco.
In addition to autos, consumers stepped up purchases of home furnishings and other products related to home sales, the beige book noted. Home sales continued to rise in many areas. And some districts noted that recent increases in home price mortgage rates were spurring “fence sitters” to close deals out quickly.
Several districts reported a rebound in tourism, noting increases in camping permits and visits to state and national parks. New York reported a pickup in ticket sales at Broadway theatres.
Despite steady hiring, the Fed report noted that workers are seeing limited pay increases. Some districts noted that workers with specialized skills are seeing larger pay increases, particularly those working in construction and high-tech industries.
The most critical report left before the Fed meets is the August employment report, which is due out Friday. Economists forecast that the economy created 177,000 jobs in August. That’s slightly higher than the 162,000 created in July, but below the average of 192,000 jobs a month added this year. The unemployment rate is expected to stay at 7.4 per cent.
Still, other signs have been mixed. Manufacturing expanded in August at the fastest pace since June 2011, according to the Institute for Supply Management, an encouraging sign.
But U.S. businesses cut back on their orders for long-lasting manufactured goods in July. And U.S. consumers barely increased spending more slowly, held back by weak income growth.