Published November 20, 2014
The U.S. economy grew moderately in most regions of the country this spring and companies kept hiring, according to a Federal Reserve survey released Wednesday
The mostly upbeat survey offered a hopeful sign after last week's more dismal data on hiring and manufacturing. Those reports sketched a picture of an economy that is slumping after a promising winter.
The positive survey, which is anecdotal, also makes it less likely that Fed policymakers will take further action in the coming months to lift the economy. The survey doesn't suggest the economy is in dire need of help, many economists said.
"This report was more upbeat than probably anyone expected," said Jennifer Lee, an economist at BMO Capital Markets. That suggests that "some of the soft reports on payrolls, auto sales, and manufacturing may be temporary."
The Fed survey shows growth in each of its 12 bank districts from April 3 through May 25. Growth picked up in 10 districts. It was steady in the Boston district, which includes all of New England, and slowed in the Philadelphia region, which includes Delaware, New Jersey and parts of Pennsylvania.
Hiring was steady or rose modestly, according to the Fed's report, known as the "Beige Book." That's in stark contrast to the government's jobs report last week, which said U.S. employers added just 69,000 jobs in May, the fewest in a year. Since averaging 252,000 a month from December through February, job growth has slowed to a lackluster average of 96,000 a month from March through May.
"We are encouraged by the overall tone ... because it suggests that business contacts are not experiencing a sharp drop-off in activity amid the heightened economic uncertainty of late," Joseph LaVorgna, an economist at Deutsche Bank, said in a note to clients.
Fed Chairman Ben Bernanke is expected to update his views on the economy and the Fed's policies during a congressional hearing Thursday.
It was the second positive reading on the economy this week. On Tuesday, a private survey found that the service sector expanded at a slightly faster pace than the previous month. The industries surveyed cover about 90 percent of the economy and include health care, retail, construction and financial services.
The Beige Book survey was mostly positive. Manufacturing and home sales improved in most districts, as did residential and commercial construction. Auto sales were strong in most areas. And businesses sought more loans, which could signal expansion plans. Small and medium-sized banks in the New York district reported the most broad-based increase in loan demand since the mid-1990s.
But the survey also pointed to some weakness in the economy. Consumer spending was flat or increased only slightly in almost all districts. That could restrain growth because consumer spending drives 70 percent of economic activity.
Americans received little in the way of pay raises. Weak wage growth could also dampen consumer spending in the coming months.
Manufacturing firms in many districts said Europe's financial crisis and uncertainty over future U.S. tax and budget policies could weigh on upcoming business decisions.
Still, gas prices have dropped sharply since peaking April 6. That could allow consumers and businesses to spend more freely on other goods, from appliances and furniture to electronics and vacations, that drive economic growth. Gasoline purchases provide less benefit for the U.S. economy because some of the revenue flows to oil-exporting nations.
The Beige Book is released eight times a year and is based on surveys by the Fed's 12 regional banks. There are no numbers in the report. But its findings, which are released two weeks before each Fed policy meeting, help influence the discussions.
Those discussions may be especially contentious when the Fed's board meets June 19-20. Last week's disappointing jobs report has heightened pressure on the central bank to take steps to accelerate growth and hiring.
Some Fed policymakers, who believe inflation is largely in check, may favor new stimulus measures. But other Fed officials fear that low interest rates and the Fed's efforts to further drive down rates by buying bonds could unleash inflation. They will likely resist any new steps.
Fed policy makers slightly upgraded their forecasts in April. They projected growth at about 2.7 percent this year, up from 2.5 percent in January.
They also estimated in April that the unemployment rate, now at a three-year low of 8.2 percent, will be between 7.8 percent and 8 percent at year's end. Three months earlier, they had predicted that the rate would be as high as 8.5 percent at the end of 2012.
Wall Street economists, however, have since moved in the other direction. Many now expect the economy to expand about 2 percent this year, down from earlier estimates of 2.5 percent.
In addition to the slowdown in hiring in May and April, reports last week showed that manufacturing activity grew more slowly last month, consumer confidence fell and a gauge of future home sales declined.
And the government said the economy expanded at a tepid 1.9 percent annual rate in the first three months of 2012. That was down from 3 percent in the fourth quarter.