The economy “continued to improve, on balance” in October and November according to the Federal Reserve’s ‘beige book’ released today—a far more positive tone than previous reports this year.
“The report seems to support other evidence that the economy is emerging from its summer soft patch, but that growth is not fast enough to reduce the unemployment rate significantly,” said Paul Dales, an economist with Capital Economics.
The report, the last of eight this year, is anecdotal economic data gathered from 12 districts in the U.S. of which 10 is growing economically. The report highlighted the manufacturing, tourism, and service sectors, which showed improvements across the board. Consumer spending was also a bright spot as consumers appear to be opening their wallets more in recent months.
Consumers spent more than $1 billion online on the “Cyber Monday,” the Monday after Thanksgiving. This is up 16 percent from last year and was called the heaviest online spending in history, according to the marketing firm comScore Inc.
The Fed said expectations for the holiday shopping season were “generally positive” and higher than last year, but most of the consumer spending was focused on buying necessities.
Housing was a different story. The Fed’s report said the housing market remains “depressed,” underscoring what other recent economic indicators have revealed.
Yesterday the S&P/Case-Shiller Index, which measures resale values over the most recent three months, found 15 of the 20 cities in the index showed year-over-year declines. November's consumer Conference Board Index revealed 1.7 percent of consumers plan to buy a home within the next six months, down from 2.2 percent in October.
“Housing is still the thorn in the side of most districts' recoveries,” said Marisa DiNatale, an economist at Moody’s.
Auto sales rose in nine of the 12 districts, according to the report. Ford, General Motors and Chrysler all reported double-digit sales increases in November.
This is significant because there hasn’t been the same support for the auto industry as there was this time last year when the government program “Cash for Clunkers” was still active in the third quarter, DiNatale said.
The report said commercial real estate numbers were mixed. There was no real consensus on whether consumer credit conditions were improving or if lending standards were relaxing.
While economic growth hasn’t been remarkable enough to make a dent on the 9.6 percent unemployment rate or significantly improve the housing market, the odds of the U.S. falling into recession again are one in three, says DiNatale.
The report comes two weeks before the Fed will meet to set monetary policy for the next six weeks. Most recently the Fed announced its $600 billion buy-back plan, QE2, in an attempt to lower long-term interest rates, which drew attacks from both the left and right.
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