WASHINGTON – U.S. economic activity continued to grow in many districts from early January to late February but conditions varied considerably across regions and within sectors, the government Reserve said on Wednesday.
The decidedly mixed picture illustrates the headache Fed policymakers face once they next meet to decide the path of interest rates on March 15-16.
Consumer spending increased in the majority of districts, the Fed said in the Beige Book report of anecdotal information collected from business contacts across the country.
Manufacturing activity was flat as it continued to harm from the strong dollar, weak demand from the energy sector along with a deteriorating global outlook.
Fed policymakers, who have so far held off raising rates of interest further after an initial rise from near zero in December, will probably avoid another rate increase this month because they continue to assess how much a slowdown in global growth, a tightening in financial conditions and lower inflation expectations will impact the U.S. economy.
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According to the Beige Book, labour market conditions continued to enhance but wage growth “varied considerably” across districts. Likewise, auto sales “varied significantly,” despite staying at elevated levels, and consumer prices were generally flat.
The U.S. central bank said in December further rate hikes would be contingent in part on inflation making tangible progress towards its 2-per cent target rate.
Contacts in Cleveland, Boston and Chicago reported caution among customers to spend in part due to market volatility and the latter two districts expressed “disappointment” consumers weren’t spending much more of their windfall from lower gas prices.
The Chicago Fed also noted “concerns about slower global economic growth had led to declines in equity markets, wider spreads for asset-backed securities, as well as an rise in financial market uncertainty.” The Dallas Fed said market and monetary policy uncertainty “had created concerns about 2016 growth prospects.”
Credit standards remained exactly the same for most districts, the Fed said. The Philadelphia Fed noted some tightening of standards, especially for energy-related industries.
In a positive sign for that Fed, wages generally increased. The St. Louis Fed reported its strongest assessment of wage development in 2 yrs, even though some other districts saw easing wage pressures.
The Beige Book was published by the Might Fed with information collected before Feb. 22, 2016.
? Thomson Reuters 2016
