The Federal Reserve in its latest Beige Book report on the economy gave a more encouraging assessment of US regional economies, as manufacturing and job growth picked up. The economy continued to expand at a moderate pace in most regions of the country, the report said. Consumer spending and manufacturing were on the rise in April and May, the Federal Reserve banks further reported. However, housing continued to remain weak, but the sluggishness was partially counterbalanced by somewhat improved conditions for commercial real estate. At the same time, inflationary pressures were present but it was not growing stronger. The report was unveiled soon after the government announced that the retail sales jumped by the most in more than a year.
Moreover, the latest Beige Book report offers credibility to the prediction by Chairman Ben S. Bernanke and his colleagues that US economic growth will bounce back from last quarter’s growth of 0.6 percent, marking the slowest in more than four years, although inflation gradually glides down. According to the report, ‘most districts reported that overall wage pressures do not seem to have increased’. In addition, despite higher energy costs in most districts and at least two mentioning rising food prices, ‘reports generally did not point toward an increase in overall price pressures’.
The federal Resrve further said in its report that most districts reported that manufacturing movement was up in the most recent times. However, growth rates varied by industry group and some districts experienced modest or no overall growth. The survey also revealed continuing weakness in residential real estate and construction sector. Most parts described their housing markets as soft or weak, the survey reported. Still the Beige Book report observance of generally moderate US economic growth has helped lift bond prices. Analysts are of the view that investors still see US economic growth picking up in the second quarter and the Fed is expected to hold interest rates stable for the anticipated future.
Overall, it is safe to conclude that the report has suggested that inflation is holding in check, with the higher growth pace having little impact on price pressures. Some experts are of the opinion that the second-quarter expansion pace accelerating to 3 percent and some have gone on to anticipate that even 3.5 percent is possible. In the meanwhile a separate report released by the Commerce department showed a 1.4 percent increase in May retail sales added to that optimism, since consumer spending accounts for about two-thirds of economic activity.
