Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, March 10, 1994 TAG: 9403100045
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
"The economy expanded moderately in January and February despite unusually severe weather in the East and Midwest," the survey of regional activity said.
Even the weather impact was not all gloomy, it said. Ski resorts and other winter getaways got a boost.
Perhaps more significantly: "Overall, only limited price pressures are reported."
Analysts said the jitters of financial markets should be calmed by the findings.
"The report said we have the best of both worlds - fairly solid economic growth with not much inflationary pressure," said Sung Won Sohn, chief economist for Norwest Corp. in Minneapolis. "I think inflation is nowhere to be found, not in the tan book and not outside of it."
The periodic report is known in some quarters as the tan book and in others as the beige book because of the traditional color of its cover, although the softbound document often is published with plain white covers.
Sohn said the good news could head off another rise in interest rates at the March 22 meeting of the Federal Open Market Committee, the central bank's monetary policy-setting panel.
But Cynthia Latta of DRI-McGraw-Hill in Lexington, Mass., said the report's analysis of inflationary pressure means the Fed governors "are pleased with their past performance. It doesn't mean they're not going to raise rates in a few weeks."
Fearing inflation could be ahead, the Federal Reserve last month raised the federal funds rate - what banks charge each other for short-term loans - to 3.25 percent from 3 percent. The boost touched off a nearly 100-point drop in the Dow Jones industrial average, left financial markets skittish and prompted congressional criticism of the Fed.
The latest Fed survey was concluded Feb. 28 and was conducted by the board's 12 regional banks.
The report found manufacturing and consumer spending are growing almost everywhere. The biggest strength is coming from car production and other durable goods as well as construction, although the Cleveland and San Francisco regions said defense and aerospace are holding down growth.
Merchants expect solid sales growth in coming months in almost all parts of the country, the survey found, and housing construction continues to improve despite the weather.
Even the Los Angeles earthquake has its bright side, the Fed said, because it will increase demand for housing repairs and highway repaving into next year.
As for inflationary pressure, the survey said, "Prices of building materials, selected metals and some chemicals are said to be rising, but prices of manufactured products and consumer goods generally are not experiencing upward pressure. . . . Prices for finished goods have remained relatively stable."
But job creation has been only modest. "Streamlining and caution continue to temper general gains in manufacturing employment," the report said.
by CNB