WASHINGTON -- The U.S. economy continued to expand in November, but prices and wage pressures remained muted, the Federal Reserve said yesterday in its periodic Report on Current Economic Conditions.
The report, known as the beige book, also noted that credit standards were "generally" tight, despite strong loan demand in most areas.
The report said economic growth remained solid -- particularly in the Chicago, Minneapolis, Richmond (which includes Baltimore) and San Francisco Fed districts -- despite a contraction in export industries. Growth slowed in Atlanta; Boston; Dallas; Kansas City, Mo.; and St. Louis, although it strengthened in New York.
Overall growth was underpinned by a rise in consumer spending, although several districts reported "weaker than expected" sales, mainly as a result of unseasonably warm weather that cut demand for winter clothing and other products.
Still, sales were healthy in some districts. Reflecting holiday shopping, sales of seasonal merchandise such as toys and other traditional gift items were strong.
Auto sales remained strong or strengthened in about half the districts due to heavy use of sales incentives and rebates.
Most districts reported strong loan demand on the coattails of lower interest rates, but bankers "reported generally tightened credit standards."
The Fed said it received several reports that lenders had raised interest rates and credit standards for commercial construction projects, hampering commercial projects in some areas.
But overall, construction activity rose, with most districts reporting robust housing markets thanks to lower interest rates on loans.
In the manufacturing sector, activity softened amid output declines in export-related industries. Half the Fed districts said manufacturing activity weakened since the last beige book, issued in October, but activity in Richmond rebounded.
The overall inflation picture remained muted, with wage pressures having "subsided somewhat in many districts," despite the fact that labor markets "remained tight in nearly all districts."
Agriculture prices remained extremely low, and financial stress in the farm sector generally continued in Midwest and Western districts, with several reporting inventory buildups in many commodities.
"Regions with good production were hurt by low product prices," the Fed said.
Pub Date: 12/10/98