Fed survey shows US recession may be over
Federal Reserve survey shows worst recession since 1930s may be over
* By Jeannine Aversa, AP Economics Writer
* On Wednesday September 9, 2009, 4:30 pm EDT
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WASHINGTON
(AP) -- Economic activity is stabilizing or improving in the vast
majority of the country, according to a new government survey, adding
to evidence that the worst recession since the 1930s is over. The
Federal Reserve's snapshot of economic conditions backs predictions by
Fed Chairman Ben Bernanke and most other analysts that the economy has
started to grow again in the current quarter.
In the
survey released Wednesday, all but one of the Fed's 12 regions
indicated that economic activity was "stable," showed "signs of
stabilization" or had "firmed." The one exception was the St. Louis
region, which continued to report that the pace of decline in economic
activity appeared to be "moderating."
Looking ahead, businesses in most Fed regions said they were "cautiously
positive" about the economic outlook.
The
assessments of businesses on the front lines of the economy was
brighter than those they provided for the Fed report in late July. At
that time, most regions said the recession was easing its grip and some
of them reported signs that activity was leveling off.
In
Wednesday's survey, the Dallas region indicated that economic activity
had "firmed." The Fed regions of Boston, Cleveland, Philadelphia,
Richmond and San Francisco mentioned "signs of improvement." The
Atlanta, Chicago, Kansas City, Minneapolis and New York regions
described activity as "stable or showing signs of stabilization."
Analysts predict the economy is growing in the current July-September quarter
at anywhere between 3 and 4 percent.
Most
of that growth should come from more spending from businesses, which
had slashed investments -- often by double-digits -- during the
recession.
Consumer spending, however, is expected to turn up
only because of the binge-buying of automobiles generated by the
short-lived Cash for Clunkers program. Buyers were given cash rebates
to trade in less efficient gas guzzlers.
The Fed's survey found
that the majority of regions did report that the government's clunkers
program "boosted traffic and sales." But aside from brisk businesses at
auto dealerships, other merchants struggled. Consumer spending remained
"soft" in most Fed regions.
Manufacturers in most regions,
meanwhile, reported "modest" improvements. The San Francisco region
said orders rose for semiconductors and other information technology
products. Richmond, Atlanta, Chicago and Minneapolis reported increases
or planned increases in automobile production. Several regions noted
more production for pharmaceutical products.
Although the ailing
residential real-estate market is still weak, it also flashed signs of
improvements. The Fed regions of Chicago, Richmond, Boston and San
Francisco observed an "uptick in sales." Most regions said buyer demand
remained stronger at the low end of the housing market, although
Philadelphia did note an "upturn in sales at the high end of the
market."
The Boston, Cleveland, Dallas, Kansas City, Richmond and
New York regions credited the first-time home buyer tax incentive with
spurring sales. Most regions reported downward pressure on home prices,
although Dallas and New York said that prices were "firming."
The
commercial real-estate market, however, continued to drag. Demand for
space remained weak and construction fell again in all regions.
On the jobs front, employment conditions "remained weak" in all the Fed regions.
The nation's unemployment rate climbed to a 26-year high of 9.7 percent in
August. It is expected to top 10 percent this year.
Many
economists predict that rising unemployment will keep consumers
cautious. For the budding recovery to be durable, businesses will have
to step up spending and investment, analysts say.
The Fed's
survey found that staffing firms in Atlanta, Dallas, Richmond,
Cleveland, Philadelphia, Boston, New York and Chicago did report a
"slight pickup" in demand for temporary workers. That's an encouraging
sign because employers will usually boost use of temp workers before
they hire new employees.
Still, several regions noted businesses
and local governments were imposing wage freezes or cutting
compensation in some cases. With the labor market weak, employers
aren't expected to be generous with wages, a force that will keep
inflation low, the Fed report said. Expectations for a lethargic
recovery also likely will prevent companies from jacking up prices,
keeping inflation subdued, the report suggested.
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