WASHINGTON — The U.S. economy ended last year on an encouraging note, with all parts of the country showing improvements. Factories produced more, shoppers spent more, and companies hired more — pointing to a stronger economy in 2011.
That’s the picture that emerged from the Federal Reserve’s survey of economic conditions released Wed nesday.
Still, risks loom. Declining home prices and millions of foreclosures are depressing housing markets around the country, the survey said.
Companies are also paying more for materials, including oil, food products, steel, textiles and chemicals, the survey noted. However, competitive pressures prevented them from passing those increased costs on to customers in the form of higher prices.
And even though employers are slowly hiring more, workers lack bargaining power to win bigger paychecks because of high unemployment, which is now at 9.4 percent.
Price increases remain tame. The Fed will monitor inflation as it reviews its $600 billion Treasury-bond- buying program, which is intended to boost the economy by lowering interest rates, encouraging spending and lifting stock prices.
Fed Chairman Ben Bernanke says he is optimistic that the economy will strengthen this year. But he warned last week that it will take up to five years for unemployment to drop to a historically normal level of around 6 percent.
The bond-buying program will come under scrutiny at the Fed’s first meeting of 2011 on Jan. 25-26. Four regional Fed presidents become voting members of the Fed’s policymaking group at that meeting. Two of them — Richard Fisher, president of the Federal Reserve Bank of Dallas, and Charles Plosser, president of the Federal Reserve Bank of Philadelphia — have voiced concerns that the bond-buying program could spur inflation.
Fisher and Plosser have reputations for being “inflation hawks,” meaning they are more concerned about the prospects of rising inflation than they are about ratcheting down high unemployment. Both men are likely to put pressure on Bernanke to scale back the $600 billion program, especially later this year if the economy continues to gain momentum as expected.
In a speech Wednesday, Fisher said the Fed has done enough to aid the economy.
“I think we have reached our limit,” he said.
Numbers
9.4% National unemployment rate
How the Federal Reserve sees 2011
RECESSION
Businesses say they no longer fear there will be a double-dip recession, although foreclosures and a depressed housing market had many concerned about a second downturn last summer.
EMPLOYMENT
The job market is firming up, with 103,000 jobs added in December, and businesses in most regions plan to increase hiring at the same or faster pace this year. Fed Chairman Ben Bernanke says five years of improvement may be needed to reach a historically normal level of unemployment.
RETAIL
Retailers across all regions experience better sales than expected after a strong holiday shopping season.
MANUFACTURING
Factories across the country are boosting production, with demand growing for cars and high-tech equipment.
$1.3 trillion Projected federal budget deficit for 2011 — the third straight year of topping the trillion-dollar mark — according to economists
