Economic conditions continue to improve at a modest pace in most U.S. regions, thanks to strong performance in the manufacturing industry and an upswing in consumer confidence.

The United States economy continued to improve in the fall, posting steady growth in most regions despite signs of deceleration in the summer. Both consumer spending and manufacturing are on an upswing, boosting the prospects of a stronger long-term recovery. However, several sources of economic pressure are likely to remain for the foreseeable future.

According to the Federal Reserve’s latest regional business survey, the Beige Book, economic conditions as a whole improved modestly in October and November, with eight of the 12 reporting districts posting a pickup in business activity, while the remaining four — Philadelphia, Cleveland, Richmond and Atlanta — experienced unchanged or mixed conditions.

Overall, nationwide economic performance was better than in the previous reporting period, largely due to gains in consumer spending on general merchandise and vehicles, as well as steady growth in the manufacturing sector.

“Manufacturing conditions were said to be, on balance, steady to moderately improving across most of the country, while conditions in the non-financial service sector generally strengthened somewhat, though with some variation across districts and across industries,” the Beige Book explains.

New York, Philadelphia, Cleveland, Minneapolis, Kansas City and San Francisco all noted moderate increases in manufacturing activity. Conditions in Boston and Dallas were mixed, despite an improvement in the biopharmaceuticals industry in Boston and high-tech manufacturing in Dallas. However, both Richmond and Chicago reported that manufacturing has leveled since the summer, while manufacturing activity continued to decline in Atlanta and St. Louis.

“Many districts reported that their contacts were optimistic about the near-term outlook,” the Beige Book notes. Manufacturers in the Boston, New York, Philadelphia, Atlanta, Minneapolis, and Kansas City districts expected business conditions to improve in the coming months, while producers in the Cleveland district expressed uncertainty about near-term conditions.”

Manufacturers in Dallas expressed cautious optimism about the near-term future, while construction professionals remained pessimistic about the future largely due to expectations of prolonged weakness in commercial real estate.

In most regions, commercial real estate and construction were characterized as very weak and deteriorating. Residential real-estate conditions improved slightly in October and November, but from a severe low. Most districts reported an increase in new home sales, although home prices were usually flat or declining and residential construction remained weak.

Despite the economic gains in most regions, employment remains a key concern nationwide. Labor conditions have remained weak since the previous reporting period, with additional layoffs, sluggish hiring and elevated levels of unemployment in the majority of Fed districts.

However, “some signs of improvement were noted,” the Beige Book adds. “For example, contacts in Boston reported that they were beginning to hire and reverse pay cuts or freezes that were implemented earlier in the year, and contacts in the St. Louis district reported that the service sector had started to expand recently.”

In light of the stubbornly high unemployment rate, the central bank is taking steps to help alleviate difficulties in the job market through targeted investments.

“With the goal of invigorating economic growth and lowering unemployment, the Fed on Nov. 3 announced a $600 billion program to buy government bonds over an eight-month period,” the Associated Press explains. “The Fed hopes that the program will spur more spending by lifting stocks and making loans cheaper. The Fed meets next on Dec. 14 and will examine what impact the program is having on the economy.”

Apart from the still-struggling labor market, Beige Book contacts reported concerns about potential wage pressures and commodity pricing issues, though these problems have been subdued in recent months.

“Amid concerns that inflation remains uncomfortably low, the report found that price and wage pressures remain tame,” the Wall Street Journal reports. “Prices for final goods and services were ‘fairly flat’ despite the rising cost of inputs such as agricultural commodities, metals and fuel. While hiring showed some improvement in most districts, wage pressures were contained as well.”

Consumer spending, depressed for much of the past year, has experienced a mild pickup since the last report. Auto sales rose in most parts of the country, and non-auto sales also increased in New York, Philadelphia, Cleveland, Richmond, Atlanta, Kansas City and San Francisco districts. Meanwhile, sales were steady or mixed in the Boston, Chicago, Minneapolis and Dallas districts.

Overall, consumer confidence has been on an upswing. The Conference Board’s latest Consumer Confidence Index, released late last month, climbed to 54.1 in November, up from 49.9 in October. The percentage of consumers anticipating an improvement in business conditions over the next six months also rose from 15.8 percent in October to 16.7 percent November, while those anticipating worsened conditions fell from 14.4 percent to 12.1 percent.

“Consumer confidence is now at its highest level in five months, a welcome sign as we enter the holiday season,” Lynn Franco, the director of The Conference Board Consumer Research Center, said. “Consumers’ assessment of the current state of the economy and job market, while only slightly better than last month, suggests the economy is still expanding, albeit slowly.”

Earlier

Economic Recovery is Decelerating

U.S. Consumer Confidence Hits 5-Month High

Resources

Full Report: Current Economic Conditions
The Federal Reserve Bank, Dec. 2, 2010

Fed Survey: Economic Growth Picks Up in Most Areas
by Jeanine Aversa
The Associated Press, Dec. 1, 2010

Beige Book Notes Improvement
by Tom Barkley and Jeffrey Sparshott
The Wall Street Journal, Dec.1, 2010

The Conference Board Consumer Confidence Index Increases
The Conference Board, Nov. 30, 2010