WASHINGTON (AP) — The economy kept expanding in all regions of the country in June and early July, helped by strength in consumer spending, a Federal Reserve survey released Wednesday indicates.
All 12 of the Fed’s regions reported growth with five – New York, Chicago, Minneapolis, Dallas and San Francisco – characterizing growth as “moderate” while the others reported “modest” growth. Boston and Richmond reported that growth came in at a slightly slower pace than the previous reporting period.
The Fed’s survey, known as the Beige Book, will be used by central bank officials when they next meet July 29-30 to review interest rate policies.
Analysts expect that the Fed will decide to keep its short-term interest rate at a record low near zero and authorize another reduction in its bond purchases aimed at keeping long-term interest rates low.
Federal Reserve Chair Janet Yellen, who spent two days delivering the Fed’s twice-a-year policy report to Congress, emphasized before both Senate and House committees that despite recent sizable gains in employment, the central bank is in no rush to withdraw the massive support it is providing to the economy.
The Fed has kept its benchmark short-term rate at zero since December 2008, and many analysts believe the first rate increase is still about a year away.
The Beige Book survey was compiled from information gathered by the Fed’s 12 regional banks in the period before July 7. The report said that consumer spending had increased in every district with auto sales generally stronger than other retail sales.
Tourism remained strong with hotels in the Boston, New York, Atlanta and Minneapolis districts describing room demand as robust.
The report said that many districts reported low inventories of homes for sales and rising home prices. But Boston, New York and St. Louis said that sales were below year-ago levels.
All 12 districts reported job gains with several districts saying that businesses were reporting difficulties in filling positions for skilled workers. Aside from wage increases to attract certain skilled workers, the districts said that wage pressures remained modest.
Manufacturing activity expanded in all 12 districts, the report said, with activity described as robust in New York, Atlanta, Chicago, Minneapolis and San Francisco while the other districts reporting more modest gains.
Manufacturing gains were helped by strength in autos, metals and the aerospace industry.
Economists said the anecdotal reports contained in the Beige Book broadly supported their view that economic growth rebounded in the second quarter after weather problems caused a steep drop in output in the first three months of the year.
Dana Saporta, an economist with Credit Suisse, said the Fed survey depicted a moderate “if not particularly robust” economic recovery, helped by higher consumer spending, increased manufacturing, stronger bank lending and stronger labor markets.
The Fed beginning in December started reducing its monthly bond purchases which have been aimed at keeping long-term interest rates low. Yellen said this week that Fed officials expect to wrap up those purchases at the October meeting.
The Fed has repeated that the federal funds rate, the key short-term interest rate it controls, will likely remain near zero for a considerable time after the bond purchases end. Many officials don’t expect the first rate increase to occur until next summer.
But Yellen did say in her testimony before the Senate and House banking committees that if labor market conditions continue to improve more quickly than the Fed is anticipating, the central bank could boost short-term rates sooner and more rapidly than currently expected.