Rising home values, more hiring and lower gas prices pushed consumer confidence in November to the highest level in nearly five years. A better mood among consumers appears to have encouraged businesses to invest more in October after pulling back over the summer. And it could point to a stronger holiday shopping season.
There are already signs that consumer optimism is leading to more spending. A record number of Americans visited stores and shopping websites over the four-day Thanksgiving weekend, according to a survey by the National Retail Federation.
Still, if lawmakers and the Obama administration fail to reach a budget deal soon, the threat of tax increases could make consumers more cautious in the final weeks of the year.
Many economists say worries about the fiscal cliff could be among a number of factors that keep growth in the October-December quarter below an annual rate of 2 percent. That's too slow to make much of a dent in unemployment and could prompt the Fed to take further action at its next meeting.
The Beige Book said that price increases remained modest. The Fed said the prices of some construction materials were rising at a faster pace in Cleveland, Chicago, Minneapolis, Kansas City and San Francisco regions. Chicago Fed officials noted that food prices had eased in that region except for the price of meat.
Wage growth remained modest, constrained by the high numbers of people looking for work. But there were exceptions due to shortages of qualified workers. North Dakota reported rising wages for oil drilling workers. In Kansas City, wages were picking up for specialized workers in transportation, high-tech industries and energy. San Francisco saw stronger wage growth for truck drivers and health care workers.