US ECONOMIC activity has “increased slightly” since the start of the year, though price pressures have persisted, the US Federal Reserve said on Wednesday in its regular summary of economic conditions.

The new report is the latest indication that the US economy remains surprisingly resilient despite the Fed’s decision to hike interest rates to tackle high inflation.

Since early January, US economic activity has “increased slightly, on balance,” the Fed announced in its regular update of economic conditions known as the “beige book.”

In total, eight of the 12 Fed districts reported “slight to modest growth in activity,” while three reported no change and one saw a slight softening in activity, it added.

The strong economy is good news for US President Joe Biden as he prepares for a likely rematch against former president Donald Trump in November.

But Biden faces an uphill battle convincing voters of his economic achievements when the cost of many goods and services has risen in recent years, and is unlikely to fall when inflation slows.

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Despite strong top line indications of growth, the Fed noted that consumer spending has inched lower, with some households cutting spending on discretionary goods and swapping more expensive items for cheaper equivalents.

The Fed’s beige book found that employment rose at a “slight to modest pace” in most regions, while the overall tightness in the labour market “eased further.”

This made it easier for employers to hire new workers, and to hold onto existing employees.

Although overall price pressures “persisted,” the Fed found that several districts reported “some degree of moderation in inflation.”

This chimes with recent US inflation data, which show the headline rate of annual price increases continues to slow, although it remains stuck above the Fed’s long-term target of two per cent. AFP