Economy Undeterred by Blackout
The worst blackout in U.S. history seems to have had only a limited effect on the economy, which flashed more growth signals in July and August.
The Federal Reserve’s latest snapshot of economic conditions around the country, released Wednesday, said that although five of the Fed’s 12 districts -- New York, Cleveland, Atlanta, Chicago and Dallas -- noted that business was affected by the mid-August power outage, “the effects were generally small.”
On the economy as a whole, the Fed’s survey said progress was being made.
Reports from the Fed’s districts “indicate that the economy continued to improve in July and August,” the report said. “In some districts, improvement occurred in selected sectors and in others it was broad-based.”
In the San Francisco district, retailers reported that sales were generally up.
Software services, travel and tourism saw improvements, as did the hard-pressed manufacturing sector, the Fed survey reported.
The regular survey of business conditions, based on information collected before Aug. 25, will help Fed policymakers when they meet on Sept. 16 to set interest rates.
Amid growing signs of an economic rebound, economists believe the Federal Reserve probably will hold a key short-term interest rate at a 45-year low of 1% at that meeting.
“All the different bits and pieces seem to add up to a pretty positive story for this quarter,” said Bill Cheney, chief economist at John Hancock. “The report supports the view that the recovery is picking up some speed.”
In other economic news, construction spending rose a modest 0.2% in July from June to a seasonally adjusted annual rate of $879.8 billion, the highest level since January, the Commerce Department said.
The Fed report suggests that manufacturing appears to be on the mend, although there is cautiousness about hiring.
“Manufacturing labor demand appears to be firming,” the survey said. “A majority of districts indicate scattered reports or projections of longer work hours and selective hiring, and several report that layoffs are becoming less frequent.”
In the Fed’s survey, 10 of the Fed’s 12 districts reported increases in manufacturing activity. The exceptions: Dallas, which showed little change, and Richmond, Va., where factory activity weakened.
“Manufacturers generally expect that their production volumes will increase somewhat during the remainder of 2003,” the Fed survey said. The factory sector has lost millions of jobs in the last three years, a sore spot for President Bush as he heads into the 2004 presidential election season.
