Fed districts find moderate growth
Manufacturing, construction picking up in much of U.S.
WASHINGTON — The U.S. economy grew at a moderate pace in most regions of the country in April and May, as consumers ramped up spending at retailers and auto dealers, the Federal Reserve said Wednesday.
In its latest survey of business conditions around the country, the Fed said manufacturing activity held steady or increased, except in the energy industry. Some companies laid off workers and cut back on drilling activities in response to the big fall in oil prices over the past year.
The Fed report, known as the beige book, will be reviewed by officials at the Fed’s June 16-17 meeting. Economists expect the central bank to delay any interest-rate increase until it sees more signs of an economic rebound.
Four districts — Boston, Atlanta, Chicago and St. Louis — reported moderate growth in manufacturing, while some other districts said growth was basically flat during the survey period.
Most districts reported improved residential and commercial real estate activity and construction. Home prices continued to rise, and the low number of homes on the market continued to hurt sales activity in some regions.
Retailers and restaurateurs in Little Rock, in the Fed’s St. Louis district, “reported that seasonal sales and catering orders were higher than one year ago; a high-end jeweler reported that luxury goods are faring well and has made plans to increase inventories.”
St. Louis district home sales increased on a yearover-year basis. Sales rose 10 percent in Louisville, Ky.; 11 percent in Memphis; and 16 percent in St. Louis. But they fell 8 percent in Little Rock.
An Arkansas poultry farmer told Fed researchers that dark meat exports “were down substantially.” The farmer attributed the decline “to international fears result-
ing from instances of the avian flu.”
The report found wideranging consequences nationally from the fall in energy prices, with over half of the Fed’s 12 districts reporting a negative effect on companies that either operate in the energy sector or provide services to energy companies. The Kansas City, Mo.,
district described a sharp fall in activity in energy producers Oklahoma and New Mexico, while the Dallas district said oilfield machinery sales were down significantly from a year ago.
The Fed report also found that the rise in the value of the dollar wasn’t uniformly hurting demand for U.S. manufactured goods. The Philadelphia and Richmond, Va., districts reported stronger demand in the rubber and plastic industries. In San Francisco, biotech
and pharmaceutical companies also experienced growing demand.
But the report said business contacts in the Boston, Cleveland, Chicago, Minneapolis and Dallas districts all reported a drag on either export sales or business investment plans from the rise in the value of the dollar against foreign currencies, which makes U.S.-made products more expensive on foreign markets.
While the Fed at its April meeting downgraded its view of the U.S. economy to reflect the effect of a harsh winter, economists believe it will upgrade its outlook at the June meeting. But private economists think the Fed will still prefer to wait until later in the year, possibly September, before it begins raising a key interest rate.
That rate has been near zero since December 2008 as the Fed tried to counteract the effect of a severe recession on the labor market and on overall economic growth.