Newspaper article THE JOURNAL RECORD

Fed Report Notes Signs of Improvement

Newspaper article THE JOURNAL RECORD

Fed Report Notes Signs of Improvement

Article excerpt

WASHINGTON (AP) -- The U.S. economy began the new year still mired in its first recession in a decade, but there were signs of improvement and business executives were hopeful for a rebound by midyear, the Federal Reserve said Wednesday.

In its latest survey of business conditions around the country, the Fed said, "While there are still indications of caution, there are also scattered reports of improvement."

The Fed noted that auto production was up sharply at many plants, in response to big zero-financing-spurred sales gains in October and November.

The central bank said that consumer spending in general was showing some signs of improvement in late December and early January, with the Cleveland, Kansas City, New York and Philadelphia Fed districts reporting better-than-expected sales.

"Many districts indicate that their contacts believe a recovery will begin by midyear, but the timing and strength are uncertain," the Fed's report declared.

The Fed survey, done eight times a year, will be used when central bank policy-makers hold their first meeting of the new year on Jan. 29-30.

Many private economists believe the Fed will cut interest rates for a 12th time at that meeting to increase the likelihood that a sustainable recovery will occur in coming months.

The picture painted of economic activity in the Fed survey conformed to views expressed recently by various Fed officials, including Fed Chairman Alan Greenspan.

Greenspan said in a speech Friday that the economy appeared to be stabilizing after the severe jolts caused by the recession, which began in March, and the September attacks.

But Greenspan warned there were still "significant risks" from a variety of forces that could derail any budding recovery.

The Fed survey found that the U.S. airline industry was continuing to suffer from falling ticket sales and soaring security costs in the wake of the terrorist hijackings.

Those terrorist attacks, hitting an economy already in recession, caused more than 800,000 job cuts in October and November alone. …

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