Economic recovery on track, Federal Reserve reports
Wednesday, April 24th 2002, 12:00 am
News On 6
WASHINGTON (AP) _ The U.S. economic recovery from the recession is on track.
Solid retail sales, brisk housing activity and improvements for some of the nation's factories gave the economy more momentum in March and early April, the Federal Reserve said Wednesday.
``The overall tone was positive,'' the Fed said in its latest survey of business conditions around the country. A few Fed regions, however, ``expressed qualifications about the pace of the recovery or the strength'' in their economies.
For instance, Boston described economic activity as mixed. Cleveland said its economy was improving at a much slower pace than earlier in the year. Kansas and Dallas said their economies remained weak despite some signs of a turnaround.
The survey, based on information supplied by the Fed's 12 regional bank districts, will be used by Fed policy-makers when they meet on May 7 to discuss interest rate policy. Most economists predict the Fed will not change interest rates _ now at 40-year lows _ given the fledgling recovery.
For most regions, retail sales rose moderately or held steady, the Fed said in the survey. Sales of home furnishings did especially well. Car sales were mixed. Tourism activity improved.
Home sales and construction activity increased in most areas, but commercial real-estate market largely still was weak, especially in San Francisco, Dallas and Atlanta.
Manufacturing either stabilized or showed signs of improving, with some plants hiring back laid-off workers. Manufacturers' capital spending plans remained limited.
Producers of auto parts, steel, residential building materials and furniture reported the strongest activity, the Fed said.
A second economic report Wednesday suggested that for manufacturers, the recovery is in low gear.
Orders to U.S. factories for big-ticket goods, including cars and computers, edged down 0.6 percent last month after a solid 2.7 percent gain in February, the Commerce Department said. The decline was the first in the past four months.
The report ``suggests a strong and broad-based recovery has yet to take hold in manufacturing,'' said Jerry Jasinowski, president of the National Association of Manufacturers.
Economists did not believe the drop in orders was a sign that the manufacturing sector was headed for a serious backslide. They saw it as a temporary rough path along the comeback trail.
``While there is continued movement forward in manufacturing, clearly the sector has not picked up a whole lot of steam,'' said economist Joel Naroff of Naroff Economic Advisors.
The government also announced Wednesday that its durable-goods reports would no longer include statistics on orders and shipments of semiconductors because a large number of chip makers declined to give the information.
Semiconductors accounted for between 3 percent and 3.5 percent of the total durable-goods tracked by the government. March's report was the first in which the information on the sector was not included.
``It robs us of some information about a key sector that has really been having some problems,'' Naroff said. ``Can we live without it? Yes. But we would prefer not to.''
A big cutback by businesses in high-tech equipment was a major reason why the economy fell into a slump. Economists have paid close attention to orders placed for semiconductors and other high-tech equipment to help gauge a turnaround in capital investment, a key ingredient to the economic recovery.
``Policy-makers and the markets have taken a particularly keen interest in the durable goods indicator as a bellwether of investment,'' said Kathleen Cooper, the Commerce's undersecretary for economic affairs. ``This omission of semiconductor data does not make the remaining data less valuable but it does hinder historical comparisons.''
In a third report, sales of new homes fell by 3.1 percent in March, following a strong 6.2 percent rise. Even with the decline, 878,000 homes were sold, at an annual rate, a still-robust level.
Economists believed the decline largely reflected the return of cold weather in March, making people feel less inclined to look at houses. But a rise in mortgage rates also played a role.