Fed’s Beige Book report finds moderate economic growth

A pickup in tourism in some parts of the country helped the economy grow at a moderate pace in December and early January.
A pickup in tourism in some parts of the country helped the economy grow at a moderate pace in December and early January. Bloomberg

The U.S. economy grew at a moderate pace in December and early January, helped by gains in the sales of autos and other consumer products, increased factory production and a pickup in tourism in various parts of the country, the Federal Reserve reported Wednesday.

The Fed said business contacts in its 12 regional banking districts, including Kansas City, were seeing modest or moderate growth.

The Kansas City Fed reported that manufacturing and other business activity in its seven-state district increased slightly, with a moderate expansion of factory production. In addition, real estate activity continued to edge up, with a “moderate rise in commercial real estate activity offsetting seasonally sluggish residential real estate activity.”

Payrolls grew in a variety of sectors nationwide, but significant wage gains were seen only by workers with specialized technical skills.

The Fed report, known as the Beige Book for the color of its cover, will form the basis of discussion at the Fed’s next meeting on Jan. 27 and 28. The Fed at its last meeting in December said it expected to remain patient as it decides when to begin raising interest rates.

Many economists say the country’s moderate growth will allow the Fed to stay patient through the first half of this year, with June the most likely date for the first increase in its benchmark rate, which has been at a record low near zero for the past six years.

In the new report, based on interviews with business contacts around the country, the Fed did find early indications that the recent sharp slide in oil prices was starting to have an impact on the economy.

The Dallas Fed said some energy firms in its district were reporting hiring freezes and layoffs. The Atlanta Fed said lower gas prices had boosted the sales of larger vehicles, but the St. Louis Fed said some auto dealers in its region were seeing excess inventories of luxury cars.

Various tourism contacts reported a brisk business, with Broadway theaters in New York City saying attendance and revenues were 10 percent higher than a year ago. Tourism was also reported up in the Richmond and Kansas City regions, but ski resorts in the Philadelphia Fed district were struggling to attract visitors in the midst of unseasonably warm weather in December. Warm weather was also having an impact on winter tourists in the Minneapolis region.