Fed Says Growth Solid, Inflation Mild

Economic growth accelerated late this summer in about half the nation, but inflation remained subdued, the Federal Reserve Board said Wednesday just two weeks before its meeting to set interest rates.

A separate report showed construction of new homes unexpectedly fell in August to the lowest level this year, pulled down by a large drop in the Northeast and smaller declines elsewhere.

The Fed’s survey of its 12 districts showed a continuation of the conditions--solid growth and quiet inflation--that have restrained policymakers from increasing interest rates since March. The survey was based on information collected before Sept. 8.

“Most regions are experiencing tight labor markets, recruiting difficulties or growing labor shortages,” it said. But two-thirds said that is not translating into higher wages.

And, the report said, “with a few exceptions, prices for goods are said to be moving very little, if at all.”

Housing starts fell 4.8% to a seasonally adjusted annual rate of 1.36 million, the lowest level since December, the Commerce Department said. It was the third decrease in four months and the sharpest since April’s 5.5% decline.

Last month, starts of single-family homes fell 5%, the sharpest drop in five months, to a seasonally adjusted annual rate of 1.07 million. Apartment construction declined 4.3% to a rate of 291,000.

Analysts said strong demand for housing, fueled by plentiful jobs, income gains and low mortgage rates, would almost certainly revive home building from August’s level, although not past last year’s record.