WASHINGTON — The economy during July and early August showed signs of improvement as retailers reported mixed results in back-to-school apparel sales, the Federal Reserve reported Wednesday in its Beige Book.
The report, an anecdotal snapshot of the economy provided by the Fed’s 12 district banks, also signaled increased strength among several manufacturing sectors, like pharmaceuticals, autos, high tech equipment and military goods. However, “markets for paper, chemicals, textiles and furniture were reportedly soft or softer than in the recent past.”
In its survey, and the first government report on the Aug. 14 blackout, the Fed said the negative effects of the one-day outage were “generally small,” although the central bank noted businesses are still weighing the impact.
In New York, three chains said the blackout caused sales to be slightly below plan and another chain said sales were above forecasts, despite the disruption. However, in general, retail sales in the New York region for b-t-s were described as “strong,” with women’s apparel sales cited as being “brisk.”
The Fed noted East Coast ports continued to pick up more business from Asia, which in turn is increasing need for warehousing and distribution in New Jersey. One freight shipping terminal reported handling 10 to 13 percent more cargo from a year ago, mostly in holiday-season retail merchandise.
The St. Louis bank cited strong apparel sales, along with jewelry, shoes, food and appliances. However, more than half of the retailers surveyed “were not expecting much growth,” despite mid-summer sales meeting their expectations. The Kansas City bank also cited strong b-t-s apparel sales among retailers in the region, and “most retailers” forecast sales to increase through the fall.
The Chicago bank reported “firmed” consumer spending in late July into early August, with retailers “generally pleased” with sales and b-t-s promotions. Retailers in Atlanta also were satisfied with early sales of fall merchandise and “continued to be upbeat about prospects for the remainder of the year.”
Soft spots for apparel sales cited by the Fed were the regions covered by the Philadelphia and Cleveland banks. In Philadelphia, “some stores have been left with undesired inventories of summer merchandise, although several noted that warm weather apparel was continuing to sell fairly well and…the consensus among retailers contacted in August is that sales will move up slowly during the fall,” the Fed said.
Meanwhile, in another economic report released Wednesday, the Congressional Budget Office concluded the economy “now seems poised for a more sustained recovery.” The CBO forecast Gross Domestic Product, which has grown by less than 2 percent in the first half of this year, to pick up steam and increase 4 percent in 2004. The congressional analysts cited increased consumer, business and federal spending, lower interest rates and tax cuts as fueling the increase.
In addition, the CBO said the ballooning federal deficit, approaching $500 billion, should peak in 2004 and gradually decline over 10 years. A large federal deficit typically threatens higher interest rates with a negative effect on business and consumer spending.
In another economic report from the World Bank, the global economy also was forecast to improve in 2004. Economic growth is seen moving faster in developing countries, with 4 percent growth for 2003 and 4.9 percent in 2004. The economies of industrialized countries as a group are projected by bank economists to grow an average of 1.5 percent this year and 2.5 percent next year.