U.S. Economy Growing Steadily--Everywhere but Southland : Commerce: Consumer spending and factory output are up in other regions. Cheap oil shaves 6.7% off trade deficit.
The U.S. economy is pumping along at a steady clip, but Southern California remains a stubborn weak spot and the region is losing ground to most of the rest of the country, the Federal Reserve said Wednesday.
Separately, tumbling oil prices in November helped narrow the U.S. trade gap, which shrank by 6.7% to $10.17 billion, the Commerce Department said Wednesday. But for the first 11 months of the year, the trade deficit remained at the worst level in six years, running at an annual rate of $118.7 billion, the department said.
In its periodic “beige book” report on economic conditions, the Federal Reserve found that weak economic conditions persisted in Southern California during December and January even as conditions in other regions improved--with consumer spending and manufacturing activity up and inflation under control. When compared with the outlook in past reports, the Fed said, the gap between economic conditions in California and those in other regions appeared to be widening.
“It’s more of the same in California, but the states outside California are doing somewhat better,” said Brian Cromwell, an economist at the Federal Reserve Bank in San Francisco. “Southern California remains the one area you can point to and say, ‘This area is still in a recession.’ ”
The report on the state of the economy in late December and early January emphasized that weaknesses in manufacturing, construction and real estate markets continued to plague Southern California, while the economy in the northern part of the state showed “signs of bottoming out or of modest improvement.”
Cutbacks in aerospace and defense manufacturing industries and weaknesses in residential and commercial real estate markets hindered economic growth in the southern part of the state, Fed officials said.
The report, which is issued eight times a year, is based on anecdotal information gathered by the Fed’s 12 regional banks. Wednesday’s report summarized information received before Jan. 10, and therefore did not take into account the impact of the latest Southern California earthquake. But Federal Reserve officials say that it would be difficult to measure the economic cost of the quake using standard economic measures.
“It’s going to be difficult for us in terms of separating out the effects of the recession from the effects of this most recent disaster,” Cromwell said. The earthquake’s effect on the region’s transportation system will be one of the key areas to watch in the days ahead in judging the effect on business, he added.
Nationwide, the report found that consumer spending during the holidays was strong this year, particularly on household items such as electronics, and automobile sales were found to be strong in some areas of the Midwest, South and West. But some weaknesses in apparel sales were reported in areas scattered throughout the nation.
On the manufacturing front, the report found that the demand for manufactured products was stronger in some areas, with increased demand for construction products reported by Fed banks in Atlanta, Boston, Dallas and Minneapolis and higher demand for automotive products reported by banks in Boston, Chicago and Cleveland.
Other strengths were reported in the demand for personal computers, capital equipment and textiles. But the report also says that sluggishness in defense industry manufacturing was reported by banks in Boston, Atlanta and San Francisco and that the manufacture of apparel was slow in some regions of the South.
On a different front, the merchandise trade deficit for October was $10.9 billion, revised from a previously reported $10.46 billion, the Commerce Department said.
The politically troublesome trade deficit with Japan also fell in November to $5.72 billion before seasonal adjustment, from $6.09 billion the prior month.
Reuters contributed to this report.
U.S. Merchandise Trade Deficit
Billions of dollars, seasonally adjusted; import figures exclude shipping and insurance.
Nov., 1993: 10.17
Source: Commerce Department
