The economic weakness that has gripped the Northeast and Middle Atlantic states this fall is slowly moving west, according to a monthly survey of nationwide business conditions released yesterday by the Federal Reserve.
Regional Federal Reserve banks in Chicago and Atlanta, which in the September survey had indicated their area economies were growing slowly, reported that by last month business activity was declining. Similarly, the St. Louis Federal Reserve Bank said the previously flat economy in its region had turned downward.
Nevertheless, the picture painted by the report showed surprising pockets of strength dotting the economic landscape and pervasive weakness only in New England.
In the Richmond Federal Reserve Bank's district, which included the Washington area, manufacturing executives reported that production fell only slightly last month and many of them expect little if any further decline. The district also includes Baltimore and other metropolitan areas in Virginia and North Carolina.
Since the sum of the regional reports appeared to add up to a slowly worsening economy rather than one contracting sharply, financial analysts said it was unlikely to cause Fed policymakers, who remain concerned about inflation, to reduce interest rates aggressively.
The reports -- based on surveys of hundreds of banking and finance executives, economists and government officials -- were conducted in preparation for the next meeting of the Fed's top policymaking group, the Federal Open Market Committee (FOMC), on Dec. 18.
Even in the regions still reporting growth -- San Francisco, Kansas City, Minneapolis and Cleveland -- the gains were getting smaller. As the Minneapolis report put it, "Economic conditions have been showing signs of weakness recently." Only in the Southwest were things looking up a bit.
The summary of the Richmond Federal Reserve Bank's findings about current conditions were largely negative, but those regarding the outlook, except for real estate, were less so.
"Reports of business and financial conditions ... suggested that economic activity declined in early November," the summary said. "Retail sales were weak through the first half of the month but showed strength after Thanksgiving. Manufacturing activity fell. Loan demand softened ... Funds for new commercial construction and speculative residential building were particularly tight. Exports continued to rise faster than imports, and agricultural conditions remained generally favorable."
In more detailed comments fleshing out that gloomy summary, however, were some signs of improvement.
For example, manufacturers were "somewhat less pessimistic than a month ago about prospects for business next year."
Many economists and analysts expect the generally weaker economy found by the Fed to be confirmed tomorrow when the Labor Department reports the unemployment rate and payroll employment levels for November.
Most forecasters believe the report will show the civilian unemployment rate rising from October's 5.7 percent to about 5.9 percent, with a moderate further drop in payrolls.
On the other hand, some analysts also expect the length of the average workweek, which took a nose dive in October, to rebound significantly.
If that happens, it could suggest that the overall economy declined less last month than it did in October.
Meanwhile, the Commerce Department said yesterday that new orders for goods received by U.S. factories rose 2.8 percent in October, the largest increase since a 4 percent gain in March.
Orders for durable goods increased 3.9 percent, primarily because of orders for aircraft and parts, while those for nondurable goods rose 1.6 percent, the department said.
Analysts said the orders figures, which signal future production levels, were hardly a sign of significant economic strength but not of rapid deterioration either.
The Fed's latest move to counter the growing economic weakness came Tuesday when the central bank reduced the level of required reserves for financial institutions. The reduction should boost bank and thrift profits, possibly encouraging more bank lending, the Fed announcement said.
A Federal Reserve official yesterday said that day-to-day implementation of monetary policy, normally more difficult than usual in December because of large and hard-to-estimate seasonal financial flows, would be even more tricky this month while the reduced reserve requirements are phased in.
The official, however, disagreed with reports that the Fed was unlikely to lower short-term interest rates between now and January just because it would be difficult to implement.
Reducing reserves requirements "adds a little bit of smoke, but not an impediment if the FOMC were to decide to do that," the official said. "It might take the market three days to understand" that the Fed had lowered its target for the federal funds rate -- the interest rate banks charge for overnight loans to each other -- rather than knowing right away.