Economic growth in the United States held steady during the 16-day partial government shutdown, even growing moderately in some regions, according to a Federal Reserve survey released Wednesday.
The Fed’s latest Beige Book, an overview of business conditions in each of the Fed’s 12 banking districts, would seem to contradict oft-repeated claim that the shutdown hurt the economy and hindered growth.
The Fed said seven of its 12 banking districts described growth as moderate. Four — Philadelphia, Chicago, Kansas City and San Francisco — said growth was modest. Boston said its regional economy continued to expand.
Manufacturing strengthened in most districts, helped by more production of cars, trucks and high-tech products. Consumers increased their spending in most regions, and retailers were optimistic (albeit cautious) about the holiday shopping season. Five districts reported positive developments in hiring; the other seven reported little change.
Some companies in Cleveland and Chicago reported heightened levels of uncertainty due to continued debate over the federal budget. And tourist destinations in Boston, Richmond and Minneapolis reported lower traffic during that time.
In November, a measure of consumers’ confidence fell to the lowest level in seven months, a drop that came after a much bigger decline in October that was blamed in part on the government shutdown.
The declines in both months were driven by falling expectations for hiring and the economy over the next six months.
Some economists also attributed the weakening confidence to Americans’ frustrations and worries about the implementation of the Obama administration’s health care reform.
Less optimism among Americans could slow the holiday shopping season and weigh on economic growth. Consumer spending drives 70 percent of economic activity.
But Americans are still making big purchases. November car sales rose 9 percent with sales running at an annual rate of 16.4 million, the best performance of the year, according to Autodata Corp.
The Beige Book survey is based on anecdotal reports collected from businesses in the 12 districts. The data will undoubtedly be discussed when the Fed meets next on Dec. 17-18.
Many economists believe the Fed will make no changes to easy-money policies (i.e. bond purchases and suppressed interest rates) at that meeting. They expect the Fed will continue to buy $85 billion a month in bonds, which are intended to keep long-term interest rates low.
But some analysts think the central bank could start to reduce those purchases in December, especially if Friday’s report on November employment is encouraging.
In June, Fed Chairman Ben Bernanke said the Fed could slow the purchases by the end of the year, if the economy and job market continued to improve. The Fed has stated that it would taper its bond purchases if unemployment fell to 6.5 percent. And minutes from the Fed’s October meeting noted that members expect data will show gains in the job market and would “thus warrant trimming the pace of purchases in coming months.”
The economy expanded at a 2.8 percent annual rate in the July-September quarter. But analysts expect growth to slow in the current quarter to about a 2 percent rate.
Here’s the full Fed report:
The Associated Press contributed to this report.
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