WASHINGTON – The U.S. economy expanded modestly in June and early July, but growth and hiring slowed in several parts of the country. The key findings of the Federal Reserve survey echoed the gloomier outlook that Chairman Ben Bernanke delivered to Congress this week.
Three of the Fed’s 12 banking districts — New York, Philadelphia and Cleveland — reported weaker growth, according to the Beige Book survey released Wednesday. A fourth, Richmond, said economic activity was mixed.
The report was a shift from the Fed’s previous survey, which noted that growth had picked up or held steady in 11 districts from mid-April through May.
The Fed also said that hiring was “tepid” in most districts in June and early July, retail sales slowed in Boston, Cleveland and New York, and manufacturing weakened in most regions.
One positive note from the survey: All 12 districts reported gains in housing.
The Beige Book, which is anecdotal, helps form the basis of discussions by the Fed’s July 31-Aug. 1 meeting.
Bernanke told lawmakers this week that growth has weakened from the start of the year. He said the Fed is prepared to take further action if unemployment stays high, but didn’t specify what steps it might take or whether any action was imminent.
Investors are hoping the Fed will launch another round of bond purchases, known as quantitative easing. The bond purchases seek to lower long-term interest rates with the goal of encouraging more borrowing and spending.
Economists noted that Fed policymakers are likely to wait a little longer before taking that step.
“While the report is not a positive one, we believe that it is still not enough to push the Fed over the edge into more quantitative easing at its next meeting in two weeks,” said Michael Dolega, an economist at TD Bank.
Jennifer Lee, senior economist at BMO Capital Markets, said the picture sketched by the survey was “glum” but not unexpected.
“The tone of the report was quite similar to Fed Chairman Bernanke’s testimony this week,” she said.
Bernanke noted that the economy, after growing at a 2.5 per cent annual rate in the second half of 2011, slowed to roughly 2 per cent from January through March. And it likely weakened further in the April-June period.
Job growth has slumped to an average of 75,000 a month in the April-June quarter from 226,000 a month from January through March. The unemployment rate was stuck in June at 8.2 per cent.
Consumers spent less at retail businesses in June for a third straight month, the government said earlier this week.
The Beige Book was compiled from information collected before July 9.
The survey found that nine regions reported slight gains in retail sales. Those largely reflected better auto sales. Auto dealers reported higher demand for more fuel-efficient vehicles.
Tourism remained strong in the New York, Richmond, Minneapolis, San Francisco and Atlanta districts.
Manufacturing expanded slowly in most districts but several noted a slowdown in new orders. Philadelphia and Richmond said that both new orders and shipments had weakened.
The Institute for Supply Management reported that manufacturing shrank in June for the first time in nearly three years. Europe’s financial crisis and slower growth in emerging markets such as China and India have dampened demand for U.S. exports. That has sapped a key source of growth since the Great Recession ended three years ago.