Fed survey finds economy growing

Associated Press photo by AJ MAST -- Dietz Werland works last mnonth on the assembly line at the Chrysler transmission plat in Kokomo, Ind., where the automaker is expanding. Auto sales are among the factors driving the nation's economic gains.
Associated Press photo by AJ MAST -- Dietz Werland works last mnonth on the assembly line at the Chrysler transmission plat in Kokomo, Ind., where the automaker is expanding. Auto sales are among the factors driving the nation's economic gains.

Strong auto sales, better hiring and a continued housing recovery helped the U.S. economy grow in January and February throughout the country, according to a survey released Wednesday by the Federal Reserve.

The survey noted that 10 of the Fed’s 12 banking districts reported moderate or modest growth, while the Boston and Chicago districts reported slow growth.

Separately on Wednesday, payroll processor ADP said U.S. businesses added 198,000 jobs in February, while the Commerce Department reported that total factory orders fell 2 percent in January from December.

But the decline was mostly due to a steep drop in volatile aircraft and defense orders that also was reported last week.

The private payroll survey also revised January’s hiring figures to show companies added 215,000 jobs that month, 23,000 more than what initially had been reported.

The figure suggests the government’s February jobs report, to be issued Friday, may come in above economists’ forecasts.

Analysts expect it will show the economy added 152,000 jobs and the unemployment rate dipped to 7.8 percent from 7.9 percent in January.

Joseph LaVorgna, chief U.S. economist at Deutsche Bank, boosted his forecast to 180,000 jobs, up from 125,000, in response to the ADP report.

Still, other economists remained cautious. Many think the huge snowstorm that shut down several northeastern states last month may drag on overall job gains.

U.S. orders for machinery and other factory goods that signal business investment surged in January, indicating confidence in the economy.

The Commerce Department said Wednesday that factory orders for so-called core capital goods, which also include equipment and computers, rose 7.2 percent from December.

It was the biggest gain in more than a year and higher than the initial 6.3 percent increase estimated by the government last week.

Commercial aircraft orders plummeted 34 percent in January, while demand for military aircraft plunged 63.8 percent. Excluding the weakness in transportation, total orders would have risen 1.3 percent in January.

Demand for durable goods, items expected to last at least three years, dropped 4.9 percent. Demand for nondurable goods, such as chemicals and paper, rose 0.6 percent.

Economists pay close attention to core capital goods because they are a good measure of business investment plans. The category excludes aircraft and military orders, which can fluctuate sharply from month to month.

Peter Newland, an economist at Barclays, said the gains in core capital goods, as well as stronger restocking by manufacturers in January, prompted Barclays’ economists to boost their economic growth estimate for the January-March quarter.

Newland said they now expect growth at an annual rate of 1.8 percent. That’s up from their initial forecast of 1.4 percent and much higher than the 0.1 percent growth rate reported for the October-December quarter.

The Federal Reserve regional economy report said consumer spending increased in most regions, although spen ding growth slowed in many districts and much of the gains were driven by auto sales.

Many districts said consumers pulled back slightly elsewhere after seeing taxes rise and gasoline prices increase. Some also expressed concerns about federal spending cuts that started on March 1.

Housing markets showed more strength in nearly all parts of the country. Manufacturing grew modestly in most regions after struggling through most of 2012. And many districts reported improvement in individual job markets.

The report, called the Beige Book, provides anecdotal information on economic conditions through Feb. 22. The information will be discussed along with other economic data during the Fed’s next policy meeting on March 19-20.

Analysts said the report was slightly more upbeat than the previous Fed survey, noting the modest rebound in manufacturing in the past two months. Jennifer Lee, senior economist at BMO Capital Markets, called the latest survey “more encouraging news on the U.S. economy.”

Many economists believe Fed officials will maintain their low-interest-rate policies at current levels but take no new steps at the March meeting.

In January, the Fed stood behind aggressive steps it launched in December to try to reduce unemployment.

It repeated that it would keep its key short-term interest rate at a record low at least until unemployment falls below 6.5 percent. And the Fed said it would keep buying Treasurys and mortgage bonds to help lower borrowing costs and encourage spending.

The unemployment rate was 7.9 percent in January when the Fed last met.

The economy has shown improvement since then, even as Americans paid higher taxes and automatic government spending cuts loomed.

On Jan. 1, nearly all Americans who draw a paycheck began paying higher Social Security taxes, and income taxes rose for the highest-earning workers.

The tax increases and broader budget debate in Washington haven’t slowed financial markets.

The Dow Jones industrial average closed Tuesday at a record high and kept rising Wednesday. The index of 30 big corporations has more than doubled since hitting a low during the financial crisis in March 2009.

Consumer confidence rose in February from January, according to surveys by both the Conference Board and the University of Michigan.

Factories and service companies both grew at the fastest pace in at least a year, according to surveys issued Friday and Tuesday by the Institute for Supply Management.