WASHINGTON – A strengthening housing recovery and robust auto sales contributed to moderate economic growth across the United States in late February and March, according to a Federal Reserve survey released Wednesday.
Growth was moderate or modest in all of the Fed’s 12 banking districts, and it accelerated in two — New York and Dallas — from January and early February.
The survey suggested that the economy performed better in March than some government data on hiring and consumer spending had indicated. That could mean the economic weakness might have been temporary.
The Fed survey, which is based on anecdotal reports, found that hiring was unchanged or improved slightly compared with the previous report. And it noted that consumer spending — which drives most of the economy — grew modestly. But the report also said higher taxes and a spike in gas prices had slowed sales.
By contrast, the Labor Department said earlier this month that job growth slowed sharply in March. And retail sales declined in March by the most in nine months, a separate report said last week.
Dana Saporta, an economist at Credit Suisse, said the survey “is consistent with the larger picture of steady if unspectacular growth.”
“We get caught up in the monthly volatility of the data, and we need to step back,” she said.
Zach Pandl, an economist at Columbia Management, an investment firm, said the survey’s rosier tone is probably one reason that several Fed policymakers have recently expressed optimism despite sluggish economic data.
The Fed survey said the recovery in home construction is gaining momentum and creating more construction jobs. It’s also boosting factory output of housing-related goods, such as lumber.
The report did note some weak spots. Several districts said manufacturers of defence-related goods had cut jobs in response to government spending cuts that started taking effect March 1.
Still, it said that growth overall was moderate, an upgrade from the “modest to moderate” pace in the previous two reports.
The Fed report, called the Beige Book, provides an overview of economic conditions from Feb. 22 through April 5. The information will be discussed along with other economic data during the Fed’s next policy meeting April 30-May 1.
At that meeting, most analysts expect the Fed to maintain its low interest rate policies but take no new steps. The Fed is expected to stick with its plan to keep short-term interest rates at record lows at least until unemployment falls to 6.5 per cent. And it will likely continue buying $85 billion a month in Treasury and mortgage bonds to try to keep long-term rates low and encourage borrowing, spending and investing.
Debate has heated up among Fed policymakers about when to start curtailing the bond-buying program, which began last fall. At their last meeting March 19-20, a majority of Fed officials said they favoured continuing the bond purchases at least through the middle of this year. But many members indicated that they want to start winding down the program before year’s end, as long as hiring and the economy continued to improve.
Since that meeting, some government reports had suggested that the economy weakened in March. Employers added only 88,000 jobs in March, a sharp slowdown from average gains of 220,000 in November through February. And consumers cut back on spending at retail stores and restaurants last month, a sign that higher Social Security taxes might have made more Americans cautious about spending.
Still, reports on housing and autos continue to signal strength. In March, builders broke the 1 million mark on homes started for the first time since June 2008. The increase in the seasonally adjusted annual rate for March was fueled by a surge in apartment construction.
And U.S. auto sales rose to 1.45 million in March, their highest level since August 2007. Car sales fell slightly from last March, but pickup sales jumped 14 per cent.
Economists forecast that the economy grew at a 3 per cent annual rate in the January-March quarter, a healthy rebound from a scant 0.4 per cent increase in the fourth quarter. But most now think growth will slow sharply to about 1.5 per cent in the April-June quarter.