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Up and Down All at Once

Economic Signals Vary Widely in Latest Fed Report

By Nell Henderson
Washington Post Staff Writer
Thursday, July 29, 2004; Page E01

U.S. railroads scrambled to add workers, a Midwest trucking company turned down new business for lack of drivers and manufacturers say they can't buy enough cement, scrap steel and other materials to fill their orders. Yet retailers complain of sagging sales, and car dealers struggle to trim bloated inventories.

San Francisco reports a labor shortage. South Dakota reports layoffs.

Employees of Cummins Inc. in Lakewood, N.Y., assemble diesel engines. The company reports high demand for its products. (Bloomberg News)

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As analysts wonder whether the nation is entering a lull or a period of sustained growth, the latest report from the Federal Reserve presented a mixed picture of an economy that continued to expand, but in uneven ways, with scattered production and transportation bottlenecks in areas where growth was strongest, and pockets of weakness elsewhere.

The report released yesterday, known as the "Beige Book," compiles anecdotes from businesses around the country and was put together to help Fed officials get a more vivid sense of the economy as they prepare for their next policymaking meeting.

Overall, the regional vignettes supported Fed Chairman Alan Greenspan's recent public comments that economic activity appears to have rebounded somewhat this month, even though businesses continued to be cautious in its hiring and investment plans.

With overall retail price increases "moderate," the report supports analysts' widespread expectations that the Fed will raise its benchmark overnight interest rate to 1.50 percent from 1.25 percent at the next meeting, scheduled for Aug. 10.

One sign that the economy is strengthening came in the Commerce Department's report yesterday that new orders for big-ticket items such as cars and appliances rose 0.7 percent in June, the first increase in three months.

However, many companies complained that rising demand for some goods was outstripping their ability to acquire and move the material they need for production, according to reports from the 12 regional Federal Reserve districts.

In the St. Louis and Kansas City districts, for example, companies complained of delays in coal shipments because of crowded railroad lines. Scrap steel shortages remained a concern in the Dallas district, with companies saying that demand from domestic steel mills is making up for a recent decline in China's appetite. Companies reported scattered cement shortages across the country, with some businesses saying that ships normally used to import the product are occupied shipping steel.

Factories in many non-auto industries hummed in recent weeks. The Minneapolis Fed reported that a bathtub maker is running three shifts a day, six days a week because of strong sales. A chemical company plans to double its manufacturing capacity at a Minnesota plant, and a watercraft maker plans to expand production.

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