Growth moderate; hiring, wages up in most of nation

WASHINGTON - The economy entered the new year in pretty good shape, with most parts of the country enjoying moderate growth, businesses boosting hiring, and workers getting bigger paychecks.

That mostly positive snapshot of business conditions around the country, released by the Federal Reserve yesterday, comes as the United States continues to deal with strains from a housing slump.

"Most reports . . . indicated that economic activity expanded at a moderate pace," the Federal Reserve said. The survey is based on information supplied by 12 regional Federal Reserve banks and collected before Jan. 8.

The Federal Reserve Bank of Philadelphia said that factories reported small increases in shipments and that retailers experienced a slight gain in sales of general merchandise. But automobile sales stayed weak.

The information from the regional Fed banks will figure into discussions at the Federal Reserve's Jan. 30 and 31 session to examine interest-rate policy.

Most economists said they believed the Fed would continue to hold interest rates steady at that time and probably through much of this year. The Fed has left interest rates alone since August, marking its first break in a two-year rate-raising campaign to fend off inflation.

Higher rates slow the economy, but also contain inflation. The Fed's goal is to slow the economy sufficiently to curb inflation, but not so much as to cripple economic growth.

On the inflation front, yesterday's Fed survey said that "overall prices increased moderately. Prices for energy and a number of materials have eased, and competition has kept prices for final goods in check."

The Fed regions of Atlanta, Chicago, Minneapolis and Kansas City described inflation pressures as "easing or moderating." Manufacturers in the Boston and Cleveland regions said prices for materials they used in production were mostly stable. They did, however, report some increases in metal prices.

On the jobs front, the Fed survey found that businesses showed an increasing appetite to hire. Some businesses in some regions had difficulty finding qualified workers. The Boston region, for instance, reported that engineering and machinist positions were especially hard to fill and that finance and accounting workers were in great demand.

Fed policymakers also have said they would keep a close eye on labor costs to make sure they did not spark unwanted inflation.

"Despite expanded hiring," the Fed survey said, "districts reported relatively moderate gains in wages."

Highlights from yesterday's Federal Reserve report on the region's economy in December:

Manufacturers saw higher shipments, with food-, furniture- and machinery-makers seeing gains. But order backlogs eased.

Retailers were slightly ahead of holiday sales in 2005. Shopper favorites were jewelry and electronics. Sales of winter coats melted in the unseasonably warm December.

Auto sales remained weak, with foreign nameplates doing better than domestic ones. Dealer lots were overstocked with new vehicles.

Some bankers reported seeing stronger residential-mortgage lending. But the view was not universal. Commercial and industrial lending expanded.

Gains on Wall Street drove greater interest in stock funds, executives said.

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