Business growth uneven in the fall, Fed survey shows

WASHINGTON - The U.S. economy grew unevenly in early fall, with more than half the regions of the country expanding modestly while others are struggling to grow.

A survey by the Federal Reserve released Wednesday found that seven of the Fed's 12 regions reported moderate improvements in business activity in September and early October. Three regions - Philadelphia; Richmond, Va.; and Cleveland - described economic activity as mixed or steady. Only two regions - Atlanta and Dallas - suggested economic growth was slow.

In the Philadelphia area, manufacturing activity was down slightly from August, while retailers said back-to-school sales were a little better than they were last year, the Fed said.

Most area businesses surveyed expect conditions to improve somewhat over the next six months, but they cautioned that growth will not be robust. Bankers said they expected only minimal growth in lending in the near term, and service-sector companies foresee slow growth.

"Some parts of our business begin to pick up, but other decline," one Philadelphia-area manufacturer told the Fed.

Added a local retailer: "Sales of home goods have begun to pick up, as well as sales of things that are not necessarily must-have. But the price has to be right."

Nationally, the Fed survey indicated that the economy is not weakening but is growing too sluggishly to drive down high unemployment, now at 9.6 percent.

"Hiring remains limited, with many firms reluctant to add to permanent payrolls given economic softness," the Fed survey concluded.

High unemployment is one of the Fed's biggest concerns. That is why Fed Chairman Ben S. Bernanke and his colleagues are widely expected to launch a new program at their Nov. 2-3 meeting to bolster the economy.

The Fed's survey, known as the Beige Book, will figure into Fed policymakers' discussions at the meeting about how the economy is faring.

Consumer spending was flat to moderately positive in most Fed regions. The exceptions: the Richmond and Atlanta regions, where mall traffic and sales declined.

The Fed's survey noted that shoppers remain price-conscious and, in general, are limiting purchases to necessities.

A weak housing market also restrained economic growth in most parts of the country. There were, however, some scattered reports of improvement. The Philadelphia region noted a pickup in sales of previously occupied homes. The Richmond, Dallas, and Kansas City, Mo., regions all reported increases in the sale of higher-priced homes.

Highlights from Wednesday's Federal Reserve report on the region's economy in September:

Overall business activity currently remains mixed, while the outlook for the next six months "is positive, on balance, but not robust."

Manufacturers reported slight decreases in shipments of finished goods and in new orders. There was some strength, though, for makers of industrial machinery, food processors, and producers of wood products.

Retail sales were up modestly from a year ago, with customer traffic and discretionary spending increasing somewhat.

Banks said loan demand was slack but steady. "Business loan demand is incredibly weak," one banker said. Another said usage of credit lines was "well below normal."

Sales of existing homes are up slightly, but new-home sales are flat. The pace is below year-ago levels for both. In commercial real estate, conditions were weakest for retail space.

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