WASHINGTON — The economy grew at a slower pace in the late fall as shoppers watched their pennies heading into the busy holiday season.
The Federal Reserve’s new snapshot, released Wednesday, suggested the strains from a severe housing slump and a painful credit crunch are affecting the behavior of individuals and businesses alike — making them somewhat more cautious.
Yet the hope that the Federal Reserve will cut a key interest rate for a third time this year to energize the economy sent stocks soaring on Wall Street. The Dow Jones industrials jumped for the second day in a row, gaining 331.01 points to close at 13,289.45. It marked the index’s biggest two-day point gain in five years.
“Reports on retail spending were downbeat in general,” the Fed survey said. “Most retailers said that they were expecting a slow holiday season, with only small gains in sales volumes compared with last year.”
Spending by consumers and businesses is the lifeblood of the country’s economic activity. The big worry for economists is that consumers and businesses will cut back on spending and investing, dealing a blow to economic growth. The chance of a recession has grown this year. Still, Fed officials and many other economists remain hopeful the country will weather the financial storm without falling into recession.
Of the 12 Fed regions surveyed, seven reported a slower pace of economic activity, while the remainder generally pointed to “modest expansion or mixed conditions,” the Fed said.
