Economy improving amid boost in retail

ASSOCIATED PRESS

The U.S. economy is continuing to rebound in the new year, with many regions reporting that retailers enjoyed a boost from last-minute holiday shopping, the Federal Reserve said yesterday.

Even the nation’s beleaguered manufacturing sector showed further signs of life, and the Fed said reports from its 12 regional banks suggested that the economic rebound that began in the second half of the past year was gathering momentum in late December and early January. Housing and auto sales remained strong amid scattered signs that manufacturers were beginning to rehire some of the 2.8 million workers laid off in the past three years.

“Reports from the Federal Reserve districts suggest that the nation’s economy has continued to improve since the last survey,” the board said in the report, called the Beige Book for the color of its cover.

The new survey will form the basis for discussion when central bank policy-makers hold their first meeting of the year on Jan. 27 and 28. Most analysts think that the Fed will continue to leave interest rates unchanged at a 45-year low of 1 percent for much of the year, hoping to support a sustained economic rebound.

In other reports yesterday, the Labor Department said wholesale prices rose 0.3 percent in the past month, reflecting higher costs for gasoline and other energy products, while the nation’s trade deficit shrank to $38 billion, the lowest level in a year, as exports rose and imports fell.

The news on inflation was even better after excluding the volatile food and energy sectors. The “core rate” of inflation fell 0.1 percent for the second month in a row, leaving the core rate of inflation up just 1 percent for the whole year.

The absence of inflationary pressures has allowed the Fed to focus on promoting growth with low interest rates rather than having to consider raising rates, which it often does at this stage of a recovery, in a pre-emptive strike against inflation.

The survey said regional sales generally were strong nationwide, helped by a surge in the last two weeks of December.

The strongest sales were reported by the San Francisco region. The Boston, Philadelphia, St. Louis and Kansas City districts also reported solid gains, with most other districts noting at least modest increases.