Stronger housing markets helped boost economic growth at the end of the summer in nearly every region of the United States, according to a Federal Reserve survey released Wednesday.
The Fed said growth improved in 10 of its 12 regional banking districts from mid-August through September, while levelling off in one region and slowing in another. Rising home sales helped lift home prices in most districts.
The report, known formally as the Beige Book, also cited an increase in auto sales in most parts of the country. Still, consumer spending was flat or up only slightly in most districts.
Manufacturing activity was mixed, with half of the districts reporting slight improvement since the previous Fed report. And hiring was unchanged in most districts.
Sal Gauatieri, senior economist at BMO Capital Markets, said the August report represents a subtle shift in the central bank's outlook. The economy improved to growing "modestly," he noted, from growing only "gradually" in the previous report.
The Beige Book provides anecdotal information on business conditions around the U.S. The information collected by the Fed's 12 regional banks will be used as the basis for the Fed's policy discussion at the Oct. 23-24 meeting.
Economists expect no major moves at the meeting because the Fed adopted aggressive new policies in September.
The Fed is buying mortgage bonds to lower longer-term rates, which could spur more borrowing and spending. And the Fed plans to keep short-term interest rates near zero until at least mid-2015, even after the recovery shows signs of strengthening.
Consumers still cautious
By making borrowing cheaper, the Fed hopes to fuel the modest housing recovery. When home prices rise, people tend to feel wealthier and spend more freely. Consumer spending drives nearly 70 per cent of economic activity.
The Fed report noted that oil production hit a record high in South Dakota, while the Minneapolis, Kansas City and Dallas districts also saw robust gains in energy production. The Atlanta and Richmond districts reported record levels for port activity in their regions.
The drought continued to weigh on farm activity in the Chicago, Minneapolis, Kansas City and Dallas districts. Dallas and Chicago reported that recent rains had improved the outlook in those districts.
Consumers have been cautious this year, which has contributed to slower growth. The economy grew at a lacklustre 1.3 per cent annual rate in the April-June quarter, down from the 2 per cent rate in the first three months of the year.
Economists expect growth to hover near 2 per cent for the rest of the year. That's typically too weak to create enough jobs to rapidly bring relief to more than 12 million unemployed Americans.
The job market is looking a little better. The unemployment rate fell last month to 7.8 per cent, down from 8.1 per cent in August.
It was the first time in more than 3 1/2 years that the rate fell below eight per cent. And it fell because of a huge increase in the number of people who said they found jobs.
There have been some other encouraging signs. Auto sales rose in September by 13 per cent from a year earlier to nearly 1.2 million. Home sales have been posting solid gains.
And consumer confidence jumped in September, according to two closely watched surveys.