WASHINGTON (AFP) - The US economy is continuing to grow and the labour market is improving, the Federal Reserve said Wednesday as it debates its first interest rate hike since 2006.
The Fed issued a snapshot of the economy known as the Beige Book, which is a collection of anecdotal information from the 12 Fed regional banks.
Taken between mid-February and March, it gave a fairly upbeat picture of recovery from the harsh February weather that brought large parts of the country to a halt.
Ten of the Fed’s 12 districts reported “moderate,” "modest” and for one, “slight” growth, while conditions held “steady” in Atlanta and Kansas City, according to the report.
“Weakening activity was attributed in part to the strong dollar, falling oil prices, and the harsh winter weather,” it said.
Labour markets across the country remained stable or continued to score modest improvements, although the toll from the rapid decline in energy prices was noted in layoffs in many Fed districts.
The difficulty in finding skilled workers appeared to grow compared with previous Beige Book reports, with that problem now frequently reported.
“Districts noted modest upward pressure on wages and overall prices,” the report said.
Overall oil and gas sector production “remains strong to increasing” despite a decline in active drilling rigs in some regions, such as North Dakota and Montana, where the counts were at five-year lows.
Demand for manufactured products was mixed.
Business service firms, accounting for a large share of US economic activity, said there was rising growth, especially for high-tech services, that they believed would continue in the near term.
“A majority of Districts reported higher retail sales, and they cited consumer savings from lower energy prices as helping boost transactions,” the report said.
Auto sales climbed in most districts, with lower gasoline prices driving a shift from cars to light trucks or sport utility vehicles.
Consumer spending on tourism and travel started to rebound from the winter’s deep freeze.
The housing market improved or held steady except in the New York district, where activity weakened.
“Contacts across the system uniformly reported that they were optimistic and many expect a greater than normal upswing in home sales with the coming of spring,” the report said.
DEBATE ON RATE HIKE
The new Beige Book will serve as a basis for discussions at the Fed’s next monetary policy meeting on April 28 and 29. The Federal Open Market Committee, the Fed’s policy arm, will debate its first interest rate increase since 2006.
Its key federal funds rate has been pegged near zero since December 2008 at the height of the financial crisis to support the economy’s recovery.
After a March meeting, policymakers signaled that a rate hike could come as early as their June 16 and 17 meeting.
But the minutes of the March meeting revealed that policymakers were divided over when to begin normalizing rates. Given the fall in energy prices and the stronger dollar, some Federal Open Market Committee participants said the economy would not be able to weather a hike until later in 2015.
And some participants said liftoff would remain unlikely until 2016, the minutes said.
“The Federal Reserve’s April Beige Book depicts an economy moving in the right direction,” said Christopher Velarides of Moody’s Analytics.
“Prices are beginning to rise appreciably, which gives credence to the Fed’s stance on raising rates later this year. Fundamentals remain strong, and better times are ahead,” he said.