Fed report sees weak economy modestly improving
WASHINGTON (Reuters) - The weak U.S. economy is improving modestly with little upward pressure on wages and finished goods despite commodity price gains, the Federal Reserve said on Wednesday in a report that gives it little reason to move from its current ultra-low interest rates.
Eight of the Fed's 12 districts reported some pickup in economic activity since an October 21 report. The remaining four -- Philadelphia, Cleveland, Richmond and Atlanta -- reported conditions little changed or mixed, the Fed said in its Beige Book anecdotal report on economic conditions.
Commercial real estate and construction ran counter to the trend of moderate pickup, however. Business contacts told the Fed those areas are very weak and in many cases deteriorating.
Battered jobs markets remained weak but were stabilizing and showing scattered signs of improvement, the Fed said.
The report pointed to little reason to worry about inflation. Some districts reported upward pressure on commodity prices, but little or no indication of upward pressure on wages or any "significant" upward pressure on finished goods prices.
The Fed -- the U.S. central bank -- held benchmark interest rates at close to zero at its November policy meeting and promised to keep rates exceptionally low for a long time to support a weak recovery likely to be held back by persistently high unemployment, which hit a 26-1/2-year plateau of 10.2 percent in October.
The U.S. economy has shed 7.3 million jobs since the recession began in December 2007, and consumers and businesses have pulled back spending sharply. The Fed said in November that its low-rate policy is warranted by the weak job market, low inflation, and low inflation expectations.
November U.S. payroll and unemployment data are due to be released on Friday morning, and a Reuters survey predicts a sharp drop in jobs lost, to 130,000 after 190,000 in October.
Consumer spending had picked up modestly for both general merchandise and vehicle sales, including a rebound in vehicle sales after a dip following the end of the government-supported "cash-for-clunkers" buying incentive program, the Fed said.
Residential real estate markets were somewhat improved from very low levels but house prices were flat or declining modestly, contacts told the Fed.
(Reporting by Mark Felsenthal; Editing by James Dalgleish)
Source: Reuters
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