Fed survey sees hopeful signs for economy
Wednesday, March 7th 2001, 12:00 am
By: News On 6
WASHINGTON - The economy, plagued by weakness in manufacturing, remained mired in a slowdown at the beginning of the year. But the latest national survey by the Federal Reserve noted some signs of hope for better days ahead.
In its review of economic conditions around the country, the Fed said Wednesday that a majority of districts reported ``sluggish to modest economic growth in February.''
While manufacturing, which has been bearing the brunt of the economic slowdown, saw activity continue to decline in most of the nation, manufacturers in the Boston and Richmond regions reported an improvement, the Fed said.
Consumer spending, which accounts for two-thirds of all economic activity, rose slightly in most districts, aided by deep discounts on winter merchandise, the survey said.
And, auto sales, ``were generally steady'' but below last year's pace.
Housing construction rose in New York, Richmond, Atlanta, Chicago and Minneapolis, but declined in St. Louis, mostly because of bad weather, the survey said.
Sales of new and existing homes continue to be fairly brisk in many regions, bolstered by cheaper mortgage rates.
The survey will be used by Fed policy-makers when they next meet on March 20 to set interest rates.
The Federal Reserve slashed interest rates twice in January, totaling a full percentage point, in an effort to prevent the ailing economy from sliding into a recession. Many economists believe the Fed will cut rates a third time, perhaps by another half point, at the March meeting.
The survey, known as the beige book for the color of its cover, is compiled from information supplied by the Fed's 12 regional banks. It is based on data collected before Feb. 26.
The survey also found that inflation, outside of soaring energy prices, remained generally subdued. ``Higher prices for energy, especially natural gas, were noted in nearly all districts, but price pressures for many other products do not appear to have increased,'' the Fed said.
Fed Chairman Alan Greenspan has blamed much of the economy's weakness on an effort by businesses to cut back quickly on production in the face of falling sales. Companies have been working hard to bring excess inventories of unsold goods into better alignment with demand.
Greenspan has estimated that economic growth was probably very close to zero at the start of the year.
In the final three months of 2000, the economy grew at an annual rate of just 1.1 percent, the weakest performance in more than five years.