The Federal Reserve said Wednesday that most district banks reported “only modest or moderate” economic growth while consumer prices were “generally stable.”
A “slow” pace in manufacturing in most areas was balanced by “generally positive” retail sales, while the housing market continued to restrain the expansion, according to the Fed’s regional survey, known as the Beige Book.
The Fed survey said in its previous report that several districts had noted “some slowing” in overall growth.
“That modest to moderate expansion is exactly where the Fed wants the economy to be,” said David M. Jones, president and chief executive of DMJ Advisors LLC in Denver. “I really saw no alarm in their discussion on the inflation side.”
Fed officials are counting on a moderate expansion to slow inflation by the end of 2008. The anecdotal data gathered by the 12 district banks over the past six weeks support that view.
The Beige Book underscored the weakness in housing markets, “little or no growth in overall lending activity” and high levels of activity in mining and energy.
“Recent Beige Books have shown deceleration,” said Robert McTeer, former president at the Federal Reserve Bank of Dallas. “This one shows some flattening out, so this is encouraging.”
The New York and Minneapolis Fed bank districts stood out, reporting “steady and firm growth,” and the Dallas Fed observed “moderately strong” growth. The nine remaining districts noted only “modest or moderate” expansions.
“Consumer prices remained generally stable or increased modestly, but most districts reported a rise in input prices, particularly for metals and raw materials,” the survey said. “Most districts reported tight labor market conditions.”
Futures prices show traders expect the central bank to leave the benchmark U.S. interest rate unchanged at 5.25 percent when Fed officials next meet May 9.
Nine districts reported “generally modest” wage increases in some industries, the Beige Book said, even though many of those same districts, such as New York, Richmond and Atlanta, reported worker shortages. The wage gains didn’t appear to be feeding through to consumer prices. Retailers and service firms in five districts “indicated that prices remained stable or increased modestly.”
The Fed’s preferred inflation benchmark has been at or above the comfort range of at least a half-dozen policymakers for almost three years.
The personal consumption expenditures price index, minus food and energy, rose 2.4 percent in the 12 months to February.
