US economy keeps up momentum: Beige Book

Washington

THE US economy grew during May and June, keeping up momentum after the first quarter's stall, the Federal Reserve's Beige Book survey said on Wednesday.

All 12 of the central bank's districts indicated that economic activity expanded, with growth characterised as "modest" or "moderate", according to the report, which will serve as a framework for the Fed's monetary policy meeting at the end of July.

Consumer spending, the driver that accounts for about two- thirds of US economic activity, revealed a mixed picture.

For some districts, low energy prices had helped boost spending. But in districts such as Minneapolis and Dallas, bordering Canada and Mexico, respectively, weaker spending was tied to the rising dollar, the report said.

Car sales increased in almost all districts, as did tourism, except for a further slowdown in New York, especially in New York City. In the generally upbeat survey, people in Boston, Philadelphia, Atlanta, Kansas City and Dallas were "optimistic about future growth".

The report signalled some weaknesses, such as the stronger dollar that was curbing US exports.

It said manufacturing activity was uneven across the country, with lower oil prices hurting the oil and gas industry, and a strong dollar dampening exports.

"Reports continued to reflect decreases in oil and natural gas drilling activity in Cleveland, Minneapolis, Kansas City, and Dallas," the Fed said.

"Reports of capital spending declines continued in Cleveland, Atlanta, and Dallas, resulting in some labour cutbacks in Atlanta and Dallas."

It said heavy machinery manufacturers in Chicago noted weak demand from the oil and gas industry for mining equipment, while accounting firms in Dallas reported growing activity in mergers and acquisitions among oil and gas-related firms.

The report, compiled by the Atlanta Federal Reserve Bank with information collected before July 3, also noted that employment had risen or held steady in most sectors, though there were some reports of layoffs in manufacturing and energy industries.

At a Capitol Hill hearing on Wednesday, Fed chair Janet Yellen indicated that the central bank saw the economy was strong enough to raise interest rates for the first time since 2006 later this year. "If the economy evolves as we expect, economic conditions likely would make it appropriate at some point this year to raise the federal funds rate target, thereby beginning to normalise the stance of monetary policy," she said. AFP, Bloomberg