Washington, Sept. 4--Business conditions perked up in the summer offering promising signs for the economy's anticipated second-half rebound.
Reports from the Federal Reserve's 12 districts "indicate that the economy continued to improve in July and August," according to the Federal Reserve's latest snapshot of business activity released Wednesday. "In some districts, improvement occurred in selected sectors and in others it was broad-based," the Fed said.
The Fed, in its so-called beige book, added that even in the Dallas district, where activity remains generally weak, business contacts were more optimistic about the economic outlook.
The economic impact of the nation's worst blackout was muted thus far, the Fed indicated.
Although business contacts said a comprehensive assessment at this point was premature, "the effects were generally small," the Fed survey said. "Even where firms were closed for several days, affected contacts suggest they are not anticipating difficulties in making up for lost production or shipments."
In the Fed's survey, ten of the Fed's 12 districts reported increases in manufacturing activity. The exceptions:
Dallas, which showed little change, and Richmond, VA, where factory activity weakened.
Some economists believe economic growth in the final six months of this year will be in the range of around 3.5 percent to just over 4 percent. Others think it will be closer to a 5 percent pace. In either scenario, such a pace would be far better than the 2.3 percent growth rate seen in the first six months.
Against this backdrop, economists believe the Federal Reserve will probably hold a key short-term interest rate at a 45-year low of 1 percent when it meets next on Sept 16. At the Fed's previous meeting in August, policy-makers not only held this rate steady but also hinted that it could stay there for some time.
Economists hope that low short-term interest rates and President Bush's third tax cut will motivate consumers and businesses to spend and invest more, thus lifting economic growth.
