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Fri, Mar 08, 2002 - Page 21 News List

US Fed sees signs of improvement

ECONOMY A report from the Federal Reserve said that most sectors are showing signs of improvement, although some other reports were a bit less optimistic

BLOOMBERG , WASHINGTON

The US economy showed signs earlier this year of recovering from a recession that began last March, the Federal Reserve said in its latest survey of the economies in each of its 12 districts.

"A majority of districts report some signs of improvement in economic conditions in January and early February," according to the report, commonly known as the beige book for the color of its cover.

Fed banks monitoring the Boston, Philadelphia, Richmond, Atlanta and Minneapolis regions witnessed "some pickup in activity."

Others reported a "mixed" performance, and only Dallas saw ``continued weak activity,'' the report said.

"The Fed's beige book acknowledges some of the improvement evident in recent economic data, but the tone of the survey could not yet be described as a ringing endorsement of the recovery," said Ian Shepherdson, chief US economist at High Frequency Economics Ltd in Valhalla, New York.

New orders placed with US manufacturers rose in January for a second straight month, the Commerce Department reported today, the latest sign the economy is starting to recover.

The factory orders statistics follow evidence yesterday that service companies, builders and other non-manufacturing companies -- the largest part of the economy -- reported their business expanded in February more than expected. The non-manufacturing index reported by the Institute for Supply Management rose to its highest level in 15 months. The organization's factory index, released last Friday, showed expansion in February for the first time since July 2000.

Retailers in most districts reported ``modest improvements'' in sales compared with the end of last year, the Fed said in its report. Home furnishing and appliance purchases were "growing strongly" in several regions and motor vehicle sales remained solid.

Manufacturing remained "generally weak," though higher demand and reductions in inventories had led to a pickup in the production of automakers and high-tech companies, the Fed said.

Service industries were "mostly sluggish or flat" in recent months, though selected industries logged improvements, the report said. Boston noted rising demand for software products and related services, Cleveland witnessed ``significant numbers'' of trucking and shipping companies recording improvement and demand for communication picked-up in San Francisco.

Real estate markets were viewed as "mixed" with interest in commercial properties weak virtually throughout the nation while demand for homes stayed strong. Demand for commercial and consumer loans has been "mixed," financial institutions said.

Labor markets continued ``to be slack in most districts'' with many firms suspending bonuses, freezing wages or skipping annual salary increases, the report said. Employment of temporary workers remained slack, although the ``worst seems to be over,'' the Fed said.

The central bank also said, "wage and price pressures in the retail sector are virtually nonexistent" with selling prices "generally stable."

After slipping into recession last March and contracting at an annual rate of 1.3 percent in the third quarter, the economy expanded 1.4 percent in the final three months of the year, leading some economists to predict the Fed will raise interest rates later this year.

The beige book was compiled by the Fed Bank of Boston and based on information received before Feb. 26. The report -- a collection of anecdotes reported to the regional Fed banks from local businesses -- gives central bankers an idea of economic development beyond what statistics show.

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