U.S. Economy Hits Warp Speed

The robust economic growth of 1998 carried into the new year with strong consumer spending, brisk construction activity, and increasing demand for labor, the Federal Reserve said Wednesday.

Despite that, "Prices of most goods remained little changed, and ... businesses remain reluctant to press for price increases," the Central Bank said in a survey of regional economic conditions before March 8.

The combination of thriving economic growth and absent inflation detected in the report, known as the "beige book," after the color of its cover, implies Fed policy-makers probably will opt for no change in interest rates when they meet March 30.

The beige book, a compilation of anecdotal information collected by the Fed's 12 regional banks, confirmed statistical reports showing the economy maintained its vigor through January and February despite continuing problems in agriculture, manufacturing, and energy production.

Even in manufacturing, where some companies have struggled with exports lost to the world economic slowdown that began a year and a half ago in Asia, "the tone ... improved in most districts," the survey said.

Six banks—New York, Philadelphia, Richmond, Va., St. Louis, Minneapolis, and San Francisco—reported stronger manufacturing and five—Boston, Cleveland, Atlanta, Chicago and Dallas—reported mixed conditions. Only one, Kansas City, said manufacturing remained weak.

"Foreign competition depressed textile, apparel, and energy-related industries," the report said.

Meanwhile, "post-holiday discounting and mild weather in some regions" contributed to continued strength in consumer spending, it said. "Motor vehicle sales increased, led by light trucks, and furniture sales benefited from robust home sales."

Agriculture, however, "continued to be plagued by low farm commodity prices, and an increasing number of farmers were under financial stress." Also, three districts Minneapolis, Kansas City and San Francisco "reported that falling oil prices were causing some oil and gas wells to be withdrawn from production."

In a speech Tuesday, Federal Reserve Chairman Alan Greenspan said that despite near-term challenges in agriculture, most farmers and farm lenders remained optimistic about the sector's long-term prospects.

Meanwhile, the beige book said, the overall economy retained its vigor and "labor markets remained tight."

"Finding qualified workers has become more difficult in several districts, and reports of faster wage increases were more widespread than in recent months," it said.

In the Philadelphia district, even manufacturing plants planned to add workers. And, employers told the New York and Kansas City districts that finding even entry-level workers was difficult.

Prices, however, remain stable, the report said, with the exception of construction material such as lumber, dryall and insulation.

By Dave Skidmore