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Fri, Oct 17, 2003 - Page 12 News List

Economy still picking up momentum: `Beige Book'

AFP , WASHINGTON

The US economy is gathering momentum but the labor market remains soft, the Federal Reserve said Wednesday in its "Beige Book" outlook as private economists were ramping up their growth forecasts.

The closely watched report released eight times a year by the central bank confirmed the strengthening pace of the world's largest economy despite a tepid job market.

"Information received from District Banks suggests that, on balance, the pace of economic expansion has picked up since the last report," the Fed said.

The report said consumer spending picked up and even the struggling manufacturing sector showed improvement. But jobs remained scarce.

"Most districts continue to describe labor markets as slack, though there are modest signs of improvement in a number of districts," the Beige Book said.

The report said the labor picture remained spotty, with some improvement in some of the regions.

Private economists are expected the pace of US economic growth to rise sharply from 3.3 percent in the second quarter to five or six percent in the third quarter. But many analysts are concerned that growth could fade without a pickup in hiring.

The Beige Book said consumer spending generally strengthened, although most districts report a pullback in auto sales.

Retailers "generally anticipate modest year-over-year gains for the upcoming holiday season," the report said, adding that "most districts report strengthening in manufacturing activity."

The Beige Book cited "broad-based strength" in residential real estate and construction, but said that commercial real estate markets are "sluggish."

Travel and tourism activity was "mixed but, on balance, showed some improvement," the Fed said.

The Fed said the data showed "modest wage growth" for most US workers, while adding that higher employer costs such as health insurance "are said to be holding down wage increases" in some cases.

As for inflation, "the various districts report little change in prices of consumer goods and services, but steep escalation in certain commodity prices," the report said.

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