Stats Likely Mean Hike (Editorial)

According to the latest Federal Reserve System’s Beige Book report, the U.S. economy showed steady growth in December and early January.

Eleven of the 12 U.S. regions showed stronger economic growth, according to the report.

So does that mean the Fed will raise interest rates again when it meets early next month? Probably, but it’s not a lock.

The Beige Book report is one of the measurements that guides the Federal Open Market Committee. But it also looks at other measuring sticks.

A recent report in The Wall Street Journal said Federal Reserve Chairman Alan Greenspan, who thinks higher productivity is the key to inflation-free economic expansion, sees productivity growth slowing down. And Fed officials are studying how the slowdown might affect inflation and how fast they should raise interest rates.

Inflation hasn’t been a big problem, finishing 2004 at 2.2 percent, which is another good indicator that the Fed will likely raise its short-term interest rate by a quarter percentage point to 2.5 percent.

Closer to home, the Fed’s Eighth District, based in St. Louis, said manufacturing activity continued to expand with plant openings, expansions and new hires. Also expanding were the services sector and retail sales.

Auto sales were mixed in the region, with new-car sales slowing while used-vehicle sales increased.

Residential real estate activity continued to increase, and commercial activity showed signs of improvement, especially in construction.

The report singled out northeast Arkansas, saying residential construction in November was very strong and commercial construction was active but not as strong as residential.

The Fed looks at an almost endless number of statistics from a variety of government agencies and private groups. It includes jobs, consumer spending, consumer confidence, factory orders, business inventories, home sales, foreign trade, inflation and Federal Reserve Bank surveys.

Altogether, that data can give a good picture of the economy and what direction it’s headed in.

And what does it all mean to you?

Plenty if you’re an investor, own a company or even if you’re a worker in a company. We all need to know which way the wind is blowing in our particular business.