Federal Reserve says its 12 U.S. bank regions expanded modestly in September and early October, a slight improvement from the previous period

Cindy Allen

WASHINGTON , October 19, 2011 (Associated Press) – The Federal Reserve says its 12 bank regions expanded at a modest pace in September and early October, a slight improvement from the previous period.

The Fed said Wednesday that consumer spending rose slightly in most districts. A key reason was more people purchased new cars, in part because dealers had a greater selection of models. Manufacturing also rebounded, particularly in the auto industry.

Supply disruptions caused by the Japanese crisis have begun to ease. That has helped increase auto production and sales.

The previous survey found growth more uneven across the country following a difficult summer that included wild fluctuations in the stock market.

The report, known as the Beige Book, covered the period from Aug. 27 through Oct. 7.

Stronger consumer spending could help tamp down concerns that the economy is at risk of a recession. The economy grew at an annual pace of just 0.9 percent in the first six month of the year, the slowest growth since the recession ended two years ago.

Recent data suggest growth picked up in the July-September quarter. In September, employers added 103,000 net jobs, and consumers increased their spending on retail goods by the most in seven months.

Consumer spending is closely watched because it accounts for 70 percent of economic activity. Americans pulled back on spending this spring in the face of higher food and gas prices.

Some economists predict growth of around 2 percent for the second half of the year. While that would ease recession fears, it's not strong enough to significantly lower the unemployment rate, which has been near 9 percent for more than two years.

In recent months, Fed policymakers have taken steps to help boost growth.

In September, the Fed voted to shift $400 billion of its investments to try to lower long-term interest rates. That followed the Fed's announcement in August that it planned to keep short-term rates at record lows until at least mid-2013, assuming the economy remains weak.

Both steps were approved on 7-3 votes. That represented the highest level of dissent at the Fed in nearly 20 years.

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