The US economy grew at a slower pace in the late fall as shoppers watched their pennies heading into the busy holiday season.
The US Federal Reserve's new snapshot, released on Wednesday, suggested the strains from a severe housing slump and a painful credit crunch are affecting the behavior of individuals and businesses alike -- making them somewhat more cautious.
Yet, the hope that the Federal Reserve will cut a key interest rate for a third time this year to energize the economy sent stocks soaring on Wall Street. The Dow Jones industrials jumped for the second day in a row, gaining 331.01 points to close at 13,289.45. It marked the index's biggest two-day point gain in five years.
"Reports on retail spending were downbeat in general," the Fed survey said.
"Most retailers said that they were expecting a slow holiday season, with only small gains in sales volumes compared with last year," the Fed said.
Spending by consumers and businesses is the lifeblood of the nation's economic activity. The big worry for economists is that consumers and businesses will cut back on spending and investing, dealing a blow to economic growth. The odds of a recession have grown this year. Still, Fed officials and many other economists remain hopeful the country will weather the financial storm without falling into recession.
The Fed report found the national economy continued to grow during the survey period of October through mid-November but at a "reduced pace." Of the 12 Fed regions surveyed, seven reported a slower pace of economic activity, while the remainder generally pointed to "modest expansion or mixed conditions," the Fed said.
The findings will figure prominently into discussions when Federal Reserve Chairman Ben Bernanke and his colleagues meet on Dec. 11 to decide their next move on interest rates. Investors and some economists believe the Fed report, along with recent turbulence on Wall Street, would justify another rate reduction.
"The Fed realizes markets are fragile, and the ongoing dislocations we expect will lead the [Fed] to ease on Dec. 11," said T.J. Marta, fixed income strategist at RBC Capital Markets.
Fed Governor Donald Kohn, in a speech Wednesday, warned that if the financial turmoil seen in recent weeks were to persist, it could further crimp the flow of credit to people and businesses, raising risks to economic growth.
Kohn, the No. 2 official at the Fed, said the recent gyrations on Wall Street "partly reversed some of the improvement in market functioning" seen in late September and last month. The credit crunch had taken a turn for the worse in August, causing stocks to nosedive.
"Should the elevated turbulence persist, it would increase the possibility of further tightening in financial conditions for households and businesses," Kohn said in remarks to the Council on Foreign Relations in New York.
Against the backdrop of such uncertainty about how forces will play out with consumers and businesses, Kohn once again said Federal Reserve policymakers must remain "nimble."
Wall Street viewed Kohn's comments as hinting that another rate cut could be forthcoming.
On the inflation front, the Fed repor said expensive energy and food put "significant" pressure on the prices of products and services that rely heavily on these materials. But most other prices were largely stable or down a bit, the Fed said. That suggested that high energy and food prices aren't spreading inflation through the economy.
National employment conditions are still mostly good, although construction and other jobs have taken a hit. In general, increases in workers' wages were moderate. The positive forces of job creation and wage growth are helping to offset some of the negative forces of weaker home values and harder-to-get credit.
Beijing’s continued provocations in the Taiwan Strait reveal its intention to unilaterally change the “status quo” in the area, the US Department of State said on Saturday, calling for a peaceful resolution to cross-strait issues. The Coast Guard Administration (CGA) reported that four China Coast Guard patrol vessels entered restricted and prohibited waters near Kinmen County on Friday and again on Saturday. A State Department spokesperson said that Washington was aware of the incidents, and urged all parties to exercise restraint and refrain from unilaterally changing the “status quo.” “Maintaining peace and stability across the Taiwan Strait is in line with our [the
EXTENDED RANGE: Hsiung Sheng missiles, 100 of which might be deployed by the end of the year, could reach Chinese command posts and airport runways, a source said A NT$16.9 billion (US$534.93 million) project to upgrade the military’s missile defense systems would be completed this year, allowing the deployment of at least 100 long-range Hsiung Sheng missiles and providing more deterrence against China, military sources said on Saturday. Hsiung Sheng missiles are an extended-range version of the Hsiung Feng IIE (HF-2E) surface-to-surface cruise missile, and are believed to have a range of up to 1,200km, which would allow them to hit targets well inside China. They went into mass production in 2022, the sources said. The project is part of a special budget for the Ministry of National Defense aimed at
READY TO WORK: Taiwan is eager to cooperate and is hopeful that like-minded states will continue to advocate for its inclusion in regional organizations, Lai said Maintaining the “status quo” in the Taiwan Strait, and peace and stability in the Indo-Pacific region must be a top priority, president-elect William Lai (賴清德) said yesterday after meeting with a delegation of US academics. Leaders of the G7, US President Joe Biden and other international heads of state have voiced concerns about the situation in the Strait, as stability in the region is necessary for a safe, peaceful and prosperous world, Lai said. The vice president, who is to be inaugurated in May, welcomed the delegation and thanked them for their support for Taiwan and issues concerning the Strait. The international community
COOPERATION: Two crewmembers from a Chinese fishing boat that sank off Kinmen were rescued, two were found dead and another two were still missing at press time The Coast Guard Administration (CGA) was yesterday working with Chinese rescuers to find two missing crewmembers from a Chinese fishing boat that sank southwest of Kinmen County yesterday, killing two crew. The joint operation managed to rescue two of the boat’s six crewmembers, but two were already dead when they were pulled from the water, the agency said in a statement. Rescuers are still searching for two others from the Min Long Yu 61222, a boat registered in China’s Fujian Province that capsized and sank 1.03 nautical miles (1.9km) southwest of Dongding Island (東碇), it added. CGA Director-General Chou Mei-wu (周美伍) told a