WASHINGTON (AFP) - Severe winter weather hit US economic activity in January and early February but the outlook in most areas “remained optimistic", the Federal Reserve’s Beige Book survey said Wednesday.
The regional review, which is used by Fed officials to set monetary policy, said unusually harsh storms had hit manufacturing, retail and auto sales and construction, contributing to sluggish growth data.
Growth was just “modest to moderate” across eight of the 12 Fed regions, stable in one and slower in three: New York, Philadelphia and Chicago – all battered by intense snowstorms during the period.
Employment continued to increase in most areas, while price and wage pressures were mostly subdued. As in recent months, the report highlighted shortages in specialized skilled labor.
Even so, the report concluded: “The outlook among most districts remained optimistic.”
The issue of what lay behind a series of disappointing economic indicators since December has worried analysts and investors.
While many have accepted the weather explanation, others have worried that a more fundamental slowdown has taken place.
Last week Fed Chair Janet Yellen said it was “quite clear” that the intense storms that have battered much of the country are a factor, but that Fed policymakers were studying the data.
“What we need to do and will be doing in the weeks ahead is to try to get firmer handle on exactly how much of that set of soft data can be explained by weather and what portion, if any, is due to softer outlook,” she told Congress.
The issue is key to Fed policy. The Federal Open Market Committee began a plan to steadily reduce its stimulus program in December, with an eye to winding it up completely later this year.
The FOMC will meet on March 18 and 19 to consider a fresh cut to stimulus, and Ms Yellen allowed that if the economy has slowed for non-weather reasons, the stimulus taper could be reconsidered.
“If there’s a significant change in the outlook, certainly we would be open to reconsidering, but I wouldn’t want to jump to conclusions here,” she said.