WASHINGTON, D.C.: The US economy continued to grow at a fairly moderate rate in recent weeks despite bad winter weather in some regions, according to a Federal Reserve report released on Wednesday (Thursday in Manila).
“Economic activity continued to expand across most regions and sectors from early January through mid-February,” with a “moderate pace” seen in half of the central bank’s 12 districts, the Beige Book said.
Unseasonably harsh weather had weighed on consumer spending and the housing market in certain areas, particularly in the Northeast. Fed contacts in the Boston area, pummeled by heavy snowfalls, “were fairly upbeat this period, notwithstanding the severe weather,” the report said.
Employment either remained stable or rose in a broad range of sectors, but wage pressures were moderate in most districts. Some contacts reported wage hikes to attract skilled workers for hard-to-fill positions, such as service-sector firms in the New York district.
Generally weak inflation remained in play, with most districts reporting “flat to slight increases” in overall prices.
The slide in crude-oil prices, which have fallen more than 50 percent since June, showed up in reduced production in several districts as energy companies scaled back investment. Most energy firms in Texas expected payrolls to fall in the first half of the year.
The West Coast ports slowdown over a contract dispute between management and union workers also hampered transportation of goods, leading some manufacturers to hold higher levels of inventories as a precaution. The ports dispute was resolved February 21 but it will take some time to clear the huge backlog of shipments.
The Beige Book, a compilation of economic information, serves as a framework for monetary policy decisions by the Federal Open Market Committee. The FOMC’s next meeting is scheduled on March 17 and 18.
Consumer spending, the main driver of US economic growth, climbed overall, except for the Kansas City district in the central part of the country where retail sales declined.
Though “harsh winter weather” slowed retail business in the New York and Boston districts, both Boston and Cleveland had reported “increased sales of winter-related items such as winter apparel, rock salt, and snow shovels.”
The word “weather” figured no less than 36 times in the optimistic report.
Analysts said the report and generally positive indicators appeared to pave the way for the Fed to raise interest rates as planned this year, widely expected by at least mid-year but not expected to be announced at next week’s FOMC meeting.
After the post-meeting FOMC statement, the Fed is scheduled to publish updated forecasts for US economic growth, unemployment and inflation. Fed Chair Janet Yellen also will give a news conference to explain the central bank’s decisions.