WASHINGTON – The Federal Reserve said Wednesday that the economy kept expanding in late February and March, despite weakness in the energy sector and a slowdown in exports of some factory and farm products because of global weakness and the strong dollar.
The Fed’s latest survey of business conditions in its 12 districts found that consumer spending was rising modestly and wages were increasing in all districts except Atlanta. Fed officials are hoping to see a pickup in wages after a prolonged period of weak wage growth following the Great Recession.
The survey, known as the Beige Book, will be considered at the Fed’s next meeting on April 26-27.
Economists expect the Fed to keep its benchmark policy rate unchanged in a range of 0.25 per cent to 0.5 per cent. The Fed boosted the rate by a quarter-point in December after keeping it at a record low near zero for seven years.
It kept rates unchanged in January and March, preferring to see what the fallout of a spreading global slowdown and turbulent financial markets would be on the U.S. economy.
Fed Chair Janet Yellen has emphasized in recent comments that the Fed still expects raise rates gradually, especially since inflation remains well below its target of price increases of 2 per cent per year.
The latest Fed survey, based on responses gathered before April 7, found that retail prices were climbing modestly, held back by falling energy prices. Low energy costs were helping to boost airline profit margins, the report said, and trimmed the cost of petroleum-based materials such as roofing shingles.
The survey found wage gains in all districts but Atlanta. New York, St. Louis, Minneapolis and San Francisco reported “moderate” wage growth, while the Chicago district characterized wage gains as “mild.” Most districts reported job growth, with only the Cleveland district reporting a decline in overall employment.
The strongest wage gains were in occupations experiencing labour shortages. Boston, Cleveland and St. Louis cited “sizeable” wage growth for workers in such fields as information technology, skilled construction jobs and some manufacturing trades.
By contrast, districts with heavy concentrations of energy industries reported layoffs due to cutbacks in exploration and production. The report said that oil and gas production continued to fall in the Atlanta, Kansas City and Dallas districts. Districts reporting layoffs in the energy sector included Cleveland, Atlanta, St. Louis, Minneapolis and Dallas.
Most districts reported gains in manufacturing, with the exception of Cleveland and Kansas City.
Housing construction expanded in most districts, with several districts crediting a mild winter for boosting home sales. The San Francisco district reported backlogs of more than six months for new single-family homes.