Confidence in economy finally rises

WASHINGTON — Retail sales are up, residential housing is booming and even the nation’s beleaguered factories are coming back to life, the Federal Reserve said Wednesday in its most optimistic assessment of the economy in more than three years.

The Fed said its latest nationwide survey of business conditions found that the economic rebound that got going in the summer picked up steam in October and early November, with improvements across many industries.

The survey, compiled from reports submitted by the Fed’s 12 regional banks, was the most upbeat since before the start of the 2001 recession and the listless recovery that has extended over the past two years.

"Descriptions of the pace of growth varied somewhat. But improvements appeared to be reasonably broadly based, with most districts noting growth in a number of industries," the Fed said.

The Fed survey, commonly called the Beige Book for the color of its cover, will be used when central bank policymakers hold their last meeting of the year on Dec. 9. The Fed is widely expected to hold a key interest rate at a 45-year low of 1 percent in an effort to bolster economic activity enough to persuade businesses to begin rehiring laid-off workers.

The Fed has been able to keep interest rates low for an extended period because of an absence of price pressures. The central bank said Wednesday that workers’ wages and consumer prices continued to be "fairly stable," although there were some increases in raw materials prices and the cost of health insurance continued to surge.

The new Fed survey found some hopeful signs on the jobless front, noting that "labor market conditions generally stabilized after an extended period of weakness," with layoffs slowing and demand rising for temporary workers.

The Beige Book report was one of a number of signs that the economy is continuing to power forward in the current quarter after the summer’s amazing 8.2 percent growth spurt.

In other reports Wednesday, the government said that demand for big-ticket durable goods shot up 3.3 percent in October, the fastest surge in more than a year, while personal incomes rose a strong 0.4 percent and filings for unemployment benefits last week fell to the lowest level since January 2001. New home sales did slip 3.5 percent in October, but still turned in the fifth best monthly sales performance on record.

"It’s hard to find anything wrong with the economy lately. Everything is going right for a change," said David Wyss, chief economist at Standard &Poor’s in New York.

The Fed survey found that manufacturing activity was improving in most districts, with Dallas, Boston, San Francisco and Minneapolis reporting rising demand for high-tech products, Atlanta and San Francisco reporting higher demand for building materials, and Richmond indicating firms in "almost all sectors reporting higher shipments."

The San Francisco district covers the West Coast and includes the Seattle area.

In terms of consumer spending, which accounts for two-thirds of total economic activity, many districts reported that demand for new fall clothing was held back by unseasonably warm weather in many parts of the country. However, most retailers were optimistic that holiday sales will turn out to be an improvement over the disappointing results of 2002.

Tourism, which has been hard hit since the 2001 terrorist attacks, showed moderate improvements this fall, with early snows and cold conditions helping boost demand in ski areas in the West.