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[WASHINGTON] A Federal Reserve survey showed most regions saw "modest" or "moderate" economic growth driven by gains in consumer spending, while the energy-rich Dallas district slowed as oil prices plunged.
"Consumer spending increased in most districts, with generally modest year-over-year gains in retail sales," the Fed said on Wednesday in its Beige Book, based on reports from its 12 districts gathered on or before Jan 5. "Auto sales showed moderate to strong growth."
The report follows Commerce Department data earlier Wednesday showing that retail sales slumped in December from the prior month. From a year earlier, sales increased 3.2 per cent in December following a 4.7 per cent gain in November.
Several districts "expect somewhat faster growth over the coming months," the Fed report showed. "Payrolls in a variety of sectors expanded moderately" while "significant wage pressures were largely limited to workers with specialized technical skills."
The Beige Book offers Fed officials, who meet Jan 27-28, anecdotal evidence about the state of the economy as they consider when to raise interest rates for the first time since 2006. Oil prices have plunged by more than half since June.
The Fed said consumer spending over the holiday period rose "modestly" from a year earlier in its Boston, Dallas, Philadelphia and Cleveland districts. Sales were "solid" in Atlanta, while holiday sales growth exceeded expectations in Chicago and met them in San Francisco.
Kansas City reported retail sales lower than a year earlier, while New York reported they were "largely sluggish."
The Dallas Fed district said growth "slowed slightly" and that several contacts expressed concern about the effect of lower oil prices on the region. Minneapolis said hiring in the energy-producing regions of North Dakota and Montana slowed as exploration decreased. Kansas City reported lower oil drilling activity and less demand for oilfield services, while a few firms had "increased difficulties accessing credit due to lower oil prices."
Fed officials have said they expect cheaper energy to boost household spending and be positive for the US economy overall, although the drop may also hold down inflation, which has been under their 2 per cent target for 31 straight months.
Policy makers are also scrutinizing wage data for evidence of shrinking labor-market slack. While a report last week showed average hourly earnings for US workers dropped from the prior month by 0.2 per cent, the biggest since comparable records began in 2006, the Beige Book said more skilled workers are able to demand higher pay.
"Significant wage pressures continued to be limited largely to workers with particular technical skills," the Fed said. Philadelphia, Cleveland and Chicago reported that "upward wage pressures tended to be limited to experienced and technically-skilled personnel."
The San Francisco district, which includes Seattle-area main production facilities of Boeing Co, the largest US exporter, cited "strong" commercial aircraft production and "sizable" order backlogs. Still, "contacts were somewhat concerned that the decline in oil prices may cause airlines to start deferring purchases of more fuel-efficient planes." Kansas City said "nearly all contacts reported increased labor costs as a result of new health care regulations."