ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Thursday, March 14, 1996 TAG: 9603140051
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
DATELINE: WASHINGTON
SOURCE: Associated Press
The U.S. economy, knocked for a loop by the blizzards of January, regained its footing in February, according to the latest nationwide survey of business conditions by the Federal Reserve.
Private economists said the reports, compiled by the Fed's 12 regional banks, were one more indication that the central bank will not cut interest rates when policy-makers meet on March 26.
The Fed's business survey reported that all regions of the country were reporting growth at moderate to solid levels in February following January's severe winter storms. It said the pickup in activity was coming without any worrisome signs of higher inflation.
Among the encouraging signs, the Fed cited significant gains in the sales of new homes across most of the country, a surge in refinancing existing mortgages by homeowners taking advantage of lower interest rates and a bounceback in retail sales from depressed January levels.
The central bank said that manufacturing activity had also rebounded in on the East and West coasts although it found continued weakness in the Midwest.
``The Fed is through cutting rates,'' said David Jones, economist at Aubrey G. Lanston & Co. in New York. ``They will keep policy unchanged now through the election and the next change will be toward higher rates, probably at the end of this year or early next year.''
The Fed last reduced interest rates on Jan. 31, its third cut in its federal funds rate since July. Before the unemployment report, many analysts were predicting two more rate cuts at the March meeting and in May.
The Fed survey is prepared eight times a year for meetings of the Federal Open Market Committee, the 12-member panel that sets interest rate policy.
In the new survey, the Fed said the biggest sign of strength was in real estate and construction. The Cleveland, Richmond, Atlanta, Chicago, Kansas City and Dallas districts were reporting higher home sales, especially in the lower end of the market, it said.
The New York, Philadelphia, Chicago and Dallas regions also reported rising demand for commercial real estate, an area where there has been severe overbuilding for a number of years, the Fed said.
In manufacturing, the survey found a more mixed picture with both the East and West coasts reporting a pickup in activity while the middle of the country - Minneapolis, Kansas City and Dallas - reported slightly slower factory orders and sales.
The increased economic activity was occurring without a pickup in inflation, the Fed said, noting that retail prices, commodity prices and wage pressures all remain subdued.
LENGTH: Medium: 54 linesby CNB