Fed Finds U.S. Growth Despite Housing Slump

The economy continued to grow in the early fall despite a “widespread cooling” in the once-hot housing market, the Federal Reserve reported Thursday.

The Fed’s latest survey of business conditions around the country found the economy expanding, with growth being described as “moderate or mixed.”

The report, however, found that there was a distinct slowdown in housing, with most of the Fed’s 12 regions reporting lower asking prices for homes, a softening in sales and rising inventories of unsold homes.

The Fed said reports from around the country “indicated widespread cooling” in housing markets, with financial institutions finding that mortgage lending activity had tapered off. That decline in lending was being offset to some extent by an increase in lending for commercial projects in several districts, the Fed said.

The latest snapshot of the economy, based on reports from the Fed’s regional banks, will be used when central bankers next meet Oct. 24 and 25 to consider what to do with interest rates.

It is widely expected that for a third straight meeting the Fed will leave rates unchanged, preferring to wait and see whether the economic slowdown brought on by previous rate hikes will be enough to keep inflation under control.

In the latest “beige book,” named for the color of its cover, two Fed districts -- Dallas and Philadelphia -- reported that growth cooled further from mid-September to early October. But other districts reported that growth had firmed in recent weeks.

A number of districts found that consumer spending -- crucial because it accounts for two-thirds of total U.S. economic activity -- was rising at a more rapid pace, even though several districts continued to note sluggish auto and home sales.

Philadelphia, Atlanta and Minneapolis reported solid back-to-school sales, New York said sales of upscale items had picked up, and clothing sales were stronger in the Boston, Cleveland and San Francisco districts. The San Francisco district includes Southern California.

The Fed said manufacturing activity was holding up well, with eight of the 12 districts reporting an increase in factory output. Tourism was described as strong, especially in the New York and Kansas City, Mo., regions.

Farm conditions improved, the Fed reported, as rainfall brought relief to drought-stricken parts of the country.