The economy should grow at a reasonable pace next year, the president of the Federal Reserve Bank of Richmond told state legislators this morning.
In housing, Jeffrey M. Lacker said several indicators of sales and construction activity hit low points earlier this year and have already risen modestly.
"Housing is no longer a major drag on GDP growth," he said, referring to gross domestic product, which is the sum total of goods and service produced in the country.
"In fact, it should make positive contributions, in welcome contrast to the past three years."
Lacker said there were signs that auto sales were rising even before the "cash for clunkers" program gave that market a sales jolt this summer.
Other consumer spending have reserved course in the third quarter and also is on the rise, said Lacker, who spoke on the economic outlook to the House of Delegates Appropriation Committee.
That stronger demand, Lacker said, is filtering through to the supply side of the economy -- the activity of businesses and people making things or providing services.
Significant improvement in financial conditions also is helping the economy, he said, noting that borrowing costs are down from a year ago while banks are in stronger financial shape so that they can make new loans.
But he said the weak labor market is worrisome.
Lacker said he thinks inflation at the annual rate of about 1.5 percent is ideal.
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