Fed survey finds faint signs of hope for economy
WASHINGTON ” The Federal Reserve said Wednesday there are some faint signs the steep plunge in economic activity that began last fall is starting to level off.
The Fed’s latest survey of business conditions nationwide found five of its 12 regional banks reporting a moderation in the pace of the economic decline.
Several regions “saw signs that activity in some sectors was stabilizing at a low level … (but) overall economic activity contracted further or remained weak,” the Fed said.
The survey, known as the Beige Book, struck a slightly more positive tone than last month’s report, which described an economy plunging rapidly after the financial shocks that occurred last fall.
The new survey was based on information each of the regional banks collected in March and early April. It will be used when Fed policymakers next meet to consider their stance on interest rates and other monetary issues on April 28-29.
Participate in The Longevity Project
The Longevity Project is an annual campaign to help educate readers about what it takes to live a long, fulfilling life in our valley. This year Kevin shares his story of hope and celebration of life with his presentation Cracked, Not Broken as we explore the critical and relevant topic of mental health.
The Fed is widely expected to keep a key interest rate at a record low of near zero while continuing to supply massive amounts of money to the banking system in the hopes of combatting the worst financial crisis to hit the country in seven decades.
Both President Barack Obama and Federal Reserve Chairman Ben Bernanke gave speeches on Tuesday that mentioned some recent signs of progress while cautioning that the recession was far from over.
Information in the new Fed survey underscored that view. The report listed a host of problems in the manufacturing, home building, and travel and tourism sectors, but noted some faint signals that the steep fall in activity was starting to moderate.
“Retail spending remain sluggish although some districts noted a slight improvement in sales compared with the previous reporting period,” the central bank said.
A rebound in consumer spending is critical since consumers account for about 70 percent of total economic activity. Consumer spending plunged at an annual rate of 4.3 percent in the final three months of last year, the biggest decline in 28 years. That was the major factor leading the overall economy, as measured by the gross domestic product, to contract at an annual rate of 6.3 percent, the worst showing since 1982.
Even though retail sales retreated a bit in March, private economists expect consumer spending to be slightly positive in the first quarter. A small rebound in spending should trim the overall GDP decline in the January-March period to around 5 percent.
However, analysts believe the current quarter should show a slightly slower rate of retreat, with GDP growth perhaps turning slightly positive by the third quarter.
Even if the current recession, which is expected to become the longest downturn in the post World War II period, does end in the second half of this year, economists say unemployment will keep rising until probably this time next year.
The jobless rate hit a 25-year high of 8.5 percent in March, a month when businesses cut another 663,000 jobs. So far in this recession, which began in December 2007, a net total of 5.1 million jobs have been lost.