Fed Beige Book: Economy shows modest growth

The economy grew at a modest to moderate pace from early October to mid-November as housing and the auto and technology industries continued to support a pickup in activity, the Federal Reserve said Wednesday.

But the government shutdown dampened manufacturing and tourism in some areas and many retailers had a tepid outlook for the holiday sales season, according to the Fed's Beige Book.

FIRST TAKE: Fed finds growth where it counts most

Named for the color of its cover, the report, released every six weeks, provides an anecdotal snapshot of the economy. The latest edition could be pivotal because it will help the Fed decide whether to dial down its financial stimulus at its Dec. 17-18 meeting.

Economic activity expanded moderately in the New York, Atlanta, Cleveland, Richmond, St. Louis, Minneapolis and Dallas Fed bank districts. Modest growth was reported in Philadelphia, Chicago, Kansas City and San Francisco, the report said.

Although consumer spending grew modestly to moderately across the country, Philadelphia retailers had "very uncertain expectations for the holiday season," while Atlanta merchants were "only mildly optimistic."

Home furnishings sales were strongest in the Boston, Cleveland and Kansas City areas, while clothing sales surged in Cleveland, Boston and Kansas City.

The auto industry remains a pillar of strength, with sales increasing at a "moderate to strong pace" across most of the nation. In Cleveland and St. Louis, dealers enjoyed a pickup in SUV and cross-over vehicle sales, while lower gasoline prices prompted Chicago buyers to drift away from fuel-efficient vehicles.

The 16-day government shutdown dampened tourism activity in the Boston, Richmond and Minneapolis regions. But Boston rebounded soon after because of the World Series games played there. Broadway openings bolstered traffic in New York while cold weather lifted ski-related bookings in Richmond and allowed hotels to raise rates for the first time in several years.

! Manufacturers in Chicago, Cleveland and St. Louis continued to cite vehicle production as a fast-growing sector, in part because of new launches and growing truck demand.

In San Francisco, sales of mobile technology products drove higher demand for semiconductors, and aerospace companies in the Pacific Northwest benefited from a big order backlog. In the Dallas area, high-tech firms said demand was "flat to modestly weaker." A few high-tech sales companies in Kansas City said federal spending cuts slowed sales.

While manufacturers were generally optimistic about near-term growth, some in Cleveland and Chicago voiced "heightened levels of uncertainty," in part because of the government cuts and another looming budget battle in Congress.

The housing market continued to pick up in most of the country. Single-family home sales slowed, however, because of seasonal factors and prices rose but at a slower pace than earlier this year. Housing inventories were at record low levels in Chicago. And multifamily construction increased solidly in the Boston, New York, Philadelphia, Cleveland, Richmond and Chicago areas.

Higher mortgage rates since spring, however, led to slower mortgage lending across much of the country.

The Beige Book painted a more mixed picture of the job market than recent Labor Department reports. Hiring picked up modestly in Philadelphia, Richmond, St. Louis, Minneapolis and Dallas areas, and was unchanged in the reset of the country.

Holiday hiring is expected to be flat in Cleveland. And in Chicago, some retailers are opting to increase employees' hours instead of hiring new ones.