U.S. Economy Shows 'Modest' Recovery, Says Federal Reserve

Manufacturing is one of the positive sectors.

In its Beige Book report on Oct. 21, The Federal Reserve said the economy is showing more signs of firming in an extension of a "modest" recovery from recession. Yet the economy is being held back by troubles in commercial real estate, offsetting improvement in the residential sector, and by "weak or mixed" job market conditions, the report said.

"Reports from the 12 Federal Reserve districts indicated either stabilization or modest improvements in many sectors since the last report, albeit often from depressed levels," said the report, to be used at the November 3-4 policymaking meeting of the U.S. central bank.

"Reports of gains in economic activity generally outnumber declines, but virtually every reference to improvement was qualified as either small or scattered."

Leading the more positive sectors were residential real estate and manufacturing, the Beige Book said.

The report said that "labor markets were typically characterized as weak or mixed, but with occasional pockets of improvement."

The latest official data showed a 0.7% pace of output decline in the second quarter, with the economy nearly emerging from the slump that led to a hefty 6.4%tumble in the first quarter of 2009. Many analysts see growth returning in the third quarter, but fear that high unemployment may be a continued drag on activity. The jobless rate rose to 9.8% in September, a 26-year high.

The report said inflation and wage pressures remained subdued and that deflationary pressures may still be an issue. "Districts generally reported little or no increase to either price or wage pressures, but references to downward pressures were occasionally noted," the report said.

Copyright Agence France-Presse, 2009

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