The nation's economy expanded at a modest to moderate pace the past six weeks, but job growth was subdued, and business uncertainty mounted due to the federal government shutdown and debt-ceiling standoff, a Federal Reserve report said Wednesday.
The Fed's "beige book," named for the color of its cover, is likely to be particularly scrutinized because the government shutdown has halted the usual releases of economic reports on September activity.
The Fed's portrayal of a "modest to moderate" expansion was similar to its early September report, showing slow but steady growth in most of the country. But the pace slowed a bit in the Philadelphia, Richmond, Va., Chicago and Kansas City Fed bank districts.
The housing and auto recovery continued to support the economy as consumer spending and manufacturing picked up modestly, and business investment grew, the report said.
But job growth "remained modest in September," with several regions citing uncertainty about budget battles in Washington, and the partial implementation in early October of the new health care law. In Cleveland and Dallas, retail hiring was largely limited to new stores. Job growth slowed in New York. Manufacturers in Chicago cut back on overtime.
Those reports appear consistent with private payroll processor ADP's survey, which showed businesses added a disappointing 166,000 jobs last month. The Bureau of Labor Statistics did not release its closely watched employment report for September because of the shutdown. Monthly job gains have slowed in recent months after averaging about 200,000 earlier this year.
Consumer spending increased modestly in most areas, with auto sales especially strong in the New York region. Retail sales generally were "steady" but accelerated some in the Cleveland and Richmond areas and slowed in Chicago, Kansas City and Dallas. In Chicago and Atlanta, back-to-school spending was not as strong as a year ago, though retailers were "generally optimistic about the holiday shopping season."
Tourism, meanwhile, picked up in Atlanta, Boston and New York. But in Boston, concerns grew about the impact of the shutdown. In Richmond, the shutdown closed some tourist attractions.
Although manufacturing activity generally increased modestly, Cleveland, St. Louis and Minneapolis saw faster growth. The pace slowed in New York, Richmond and Chicago. Steel demand rose in Cleveland, Chicago, St. Louis and San Francisco. Sales of construction materials were strong in Philadelphia, Cleveland and San Francisco, but flat to down in Dallas and Chicago.
"While there was little immediate disruption from the federal government shutdown, contacts worried about the potential impact if the closing became prolonged," the Fed report said.
Business investment also increased modestly. In Philadelphia, investment in information technology equipment rose. But in Cleveland, "low natural gas prices and regulatory uncertainty" slowed the construction of gear to support the shale gas boom.
Several areas, however, expected capital spending -- which has weakened the past year -- to increase in the months ahead.
Housing construction, meanwhile, continued to pick up steam, rising robustly in Minneapolis and Dallas but modestly in Richmond and Philadelphia. Strong home sales in New York and Dallas were partly offset by the Jersey Shore, "which is still recovering from Hurricane Sandy."
While some areas reported mounting concerns about rising mortgage rates, that prospect boosted sales in Boston as home buyers rushed in, anticipating future interest rate increases.
In some areas, mortgage lending weakened because of the higher rates. But new mortgages continued to climb in Philadelphia, Richmond and Dallas.
Copyright 2013 USA TODAY
Original headline: Fed: Economy grew despite shutdown
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