Fed Likely to Report Continued Strength

The Federal Reserve will issue its latest assessment of the U.S. economy this week, and it is expected to sound like a summer rerun--the economy is strong, labor is tight and inflation has yet to gain ground. The assessment will come Wednesday in the “beige book” report, which is based on reports from the Fed’s 12 district banks about economic activity in their regions in the last two months. Investors will be watching for the report because it will help shape discussions on interest rate policy at the Oct. 5 meeting of the Fed’s policy panel, the Federal Open Market Committee. The report “will sing the same song that we have been hearing so far this year”--low commodity and production costs are keeping rising labor costs at bay, said Vince Boberski, an economist at Dain Rauscher Inc. in Chicago.

In other reports this week:

* The Commerce Department on Tuesday is likely to say that the trade deficit in goods and services probably narrowed in July after setting a record a month earlier as exports increased and imports showed little change. The trade deficit probably totaled $23.5 billion in July, down from $24.6 billion in June, according to the average of 23 analysts’ forecasts in a Bloomberg News survey.

* The Treasury Department is expected to report Wednesday that the federal budget deficit narrowed in August to $5.8 billion from $11.2 billion a year earlier, analysts said. The government is on course to post its second consecutive annual budget surplus when the fiscal year ends Sept. 30.

* The Labor Department’s weekly report on first-time claims for state unemployment benefits, due Thursday, is expected to fall 1,000 to a seasonally adjusted 287,000 in the week ended Sept. 18 after unexpectedly falling 4,000 to 288,000 a week earlier. In August, the overall unemployment rate declined to 4.2% from 4.3% in July, tying a 29-year low.