Fed Survey Finds Growth Continuing

The nation is enjoying “continued moderate to strong” economic growth, with consumer prices holding steady, the Federal Reserve said Wednesday in its latest survey of business conditions around the country.

The survey, compiled from reports from the 12 Fed regional banks, said the strong economy is keeping labor markets tight, meaning employers are finding it difficult to hire scarce workers for job openings, something that economists fear could lead to wage and price inflation down the road.

The survey, known as the “beige book” for the color of its cover, will be used when Fed policymakers meet Dec. 21 to review the central bank’s stance on interest rates.

“There were some reports of larger recent salary increases in some industries and regions,” the Fed said. But the overall rate of increase in wages and salaries does not appear to be accelerating and the scattered larger gains have not filtered into a significant increase in product prices.

“Prices appear to be mostly steady at the retail level,” the central bank said.

Consumer spending, meanwhile, picked up over the Thanksgiving weekend, the Fed survey found, after having been depressed earlier in the month by unusually warm weather.

The San Francisco regional bank reported strong economic conditions, with retailers showing solid sales growth and manufacturing picking up. Real estate activity was strong overall in the region, although there was a slight cooling in some markets. Despite reports of labor and materials shortages in some sectors, upward pressure on wages and prices was modest overall in the region.

Many economists predict the Fed will leave interest rates unchanged until next year, citing concerns about possible problems stemming from the Y2K computer changeover. Still, many say the Fed will boost rates in February or March to slow the sizzling economy.

The beige book was based on information collected before Nov. 30.

Separately, top economic forecasters, in a survey released Wednesday, predicted the economy will slow a bit next year but not enough to discourage a pickup in inflation.

The National Assn. for Business Economics estimated that the economy will grow by 3.2% in 2000, down from the 3.9% it is forecasting for 1999.

But inflation at the consumer level is expected to increase to a still-modest 2.5% next year, compared with an estimated 2.2% this year, the association said.