Asian crisis hits U.S. manufacturing, farming, Fed says
Asian crisis hits U.S. manufacturing, farming, Fed says
WASHINGTON (AP): The Asian economic crisis is taking a toll on
American manufacturers and farmers, but strong consumer demand is
helping to keep the overall economy steaming ahead, the Federal
Reserve said Wednesday.
The Fed found widespread evidence that Asia's troubles were
cutting into demand for American manufactured goods and
depressing the prices of many farm commodities.
But even with these adverse effects, the 12 Fed districts
"generally indicate a high level of economic activity," the
central bank said in its latest snapshot of economic conditions
around the country.
The report is used by Fed policy-makers to determine whether
to change interest rates.
Their next meeting is scheduled for Aug. 18 and economists
believe the central bank will leave policy unchanged because of
the uncertainties created by Asia and the volatile U.S. stock
market.
The latest report said that economic activity had been
depressed in the second quarter, not only by Asia but also by the
General Motors strike, which was settled last week.
It said the Atlanta, Chicago, Richmond, New York and St. Louis
districts had all reported declines in manufacturing employment
due to the GM strike with Asia's impact widespread as well.
"Weakness in Asia and increased low-cost imports (from that
region) continued to depress activity for a variety of U.S.
products," the Fed survey found. "Manufacturers reported that
sales and orders for apparel and textiles, computing equipment,
electronic components, industrial machinery, paper and wood
products fell in many districts."
The Asian impact on the farm sector has been evident in
falling prices for many crops as recessions in many nations in
that part of the world have contributed to lower demand.
"Price declines for some commodities have been so large that
producers cannot cover costs," the report said.
Adding to farmers' troubles from Asia, the central bank noted
severe droughts across the South that destroyed crops and damaged
pasture land for cattle.
But offsetting these weaknesses, the Fed reported that
consumer demand has remained strong and low mortgage rates have
contributed to a boom in housing sales and construction.
Federal Reserve Chairman Alan Greenspan, delivering the
central bank's midyear report to Congress last month, stressed
that even with the depressing effects of the Asian crisis on the
U.S. economy, the central bank was less concerned with the threat
of a recession than the possibility that tight labor markets
could push inflation higher.
The latest economic report seemed to underscore worries on the
inflation front, noting that all regions of the country were
reporting tight labor markets.
"Labor shortages were broad-based and some skilled workers
were in especially short supply," the central bank said.
The central bank has not changed interest rates since March
1997. The Fed's benchmark federal funds rate, the interest that
banks charge each other on overnight loans, has been at 5.5
percent since then.
Most analysts believe that stable inflation so far this year
will allow the Fed to remain on hold until more is known about
Asia's impact on the U.S. economy.