Fed's Beige Book sees 'mostly modest' US economic growth

[WASHINGTON] Most of the regions in the US economy were growing only modestly during the April-May period, with lackluster consumer spending, according to the Federal Reserve's Beige Book survey Wednesday.

But the report noted that the outlook in a number of areas was "generally optimistic", and labour markets were tighter, a likely positive sign for future wage increases for workers.

The anecdotal survey of economic activity across the Fed's 12 regions will help the Fed assess the strength of growth around the country as it weighs tightening monetary policy at its next meeting in two weeks.

For that, the newest Beige Book echoed recent hard data showing a pickup in growth from the sluggish first quarter during the April-to-mid-May period.

But the picture was mixed from region to region: Activity was stronger in San Francisco while it slowed in Chicago and Kansas City.

In most areas consumer spending rose modestly, though it appeared to fall in New York.

Construction and the real-estate business were broadly better, but tourism remained a mixed bag across regions.

But signs from the report supported the view that the labour market continues to strengthen.

"Employment grew modestly since the last report, but tight labour markets were widely noted; wages grew modestly, and price pressure grew slightly in most districts," it said.

The report came before the Federal Open Market Committee, the Fed's policy body, meets on June 14-15 on whether to raise interest rates for the first time since December.

Recent comments by Fed Chair Janet Yellen and other FOMC members made clear that if growth picks up firmly they are ready to increase the short-term benchmark federal funds rate, which could drive up many commercial rates.

But analysts mostly think that the Fed will wait for even stronger signs of growth, inflation and rising wages to take that step, with markets betting more likely that it will come at the end of July.

AFP