Fed Survey Hints Economic Condition Is Improving

Fed survey hints economic condition is improving

(Source: Bloomberg) 14 April 2010

The report Beige Book business survey of twelve federal districts based on the data collected before April 5, indicated an increase in economic activities in the month of April in at least 11 of the 12 districts .The Beige Book data will be used by the central bank policymakers to design monetary policy and to define the new interest rates, at the federal open market committee meeting scheduled to be held on April 27 28.

The survey indicates an increase in economic activities in the month of March as eleven of thirteen retail sectors showed gains in March .The highest gains of 6.7% was recorded in auto sales, 3.1% in construction material and 2.3 % in sales of clothing.

Retail sales

Retail sales and sales of cars and trucks increased in many parts of the country, and housing activities surged in some markets. Commercial real estate market remained weak throughout the country but the sales of building material rose by 3.1% .The sales of motor vehicles rose in eight Fed regions.

Retail sales increased 1.6% and it is one of the highest since November 2009. For the month of March, Wall Streets expectation was 1.2% of gains, but in the current year sales was 7.6% more than previous year, which is one of the highest in four years. In motor vehicle and motor parts, the retail sales rose by 6.7% in March 2010. Manufacturing in food, auto parts and other units increased. Consumer price was up by 0.1% in the March, which includes the core prices (excluding the energy and food), whereas, in February the consumer price was flat.

Job market

The increase in consumer spending indicates the saving rate is declining and to sustain spending, job market should improve. There are almost 15 million unemployed in the country and job market did not show a positive sign but the rise in the hiring of temporary staff was noticeable. Wage pressure was not high and the interest rates are expected to be low for some more time.

A strong demand for temporary staffer was found in at least four regions and in Atlanta many companies increased the number of working hours of existing workers, which also indicates an increase in demand and production. In March, the number of jobs added to the market was 162,000 and this is one of the highest in three years but the unemployment rate remained constant at 9.7%.

Consumer price index

The consumer price index of labor department increased 1.1% by the end of the month (the food and energy data is not included).

Fed chairman Ben S. Bernanke said the weakness in residential and non residential construction is hindering economic growth.

The survey found an increase in production and sales of home furnishing and electronics goods. Spending in tourism also increased in the first quarter of 2010.The survey will help market experts to make an estimate of the first quarter GDP.

by: Bruce Wills

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