Fed finds gains across U.S. economy

In this June 6, 2014 photo, servers Lindsey Hayden, second from left, and Emma Franz serve lunch to patrons at Coppertop restaurant in Valley City, Ohio. A Federal Reserve survey released Wednesday, July 16, 2014 indicates the economy kept expanding in all regions of the country in June and early July, helped by strength in consumer spending.

In this June 6, 2014 photo, servers Lindsey Hayden, second from left, and Emma Franz serve lunch to patrons at Coppertop restaurant in Valley City, Ohio. A Federal Reserve survey released Wednesday, July 16, 2014 indicates the economy kept expanding in all regions of the country in June and early July, helped by strength in consumer spending.

Thursday, July 17, 2014

WASHINGTON -- The economy kept expanding in all regions of the country in June and early July, helped by strength in consumer spending, a Federal Reserve survey released Wednesday indicates.

All 12 of the Fed's regions reported growth with five -- New York, Chicago, Minneapolis, Dallas and San Francisco -- characterizing growth as "moderate" while the others reported "modest" growth. Boston and Richmond reported that growth came in at a slightly slower pace than the previous reporting period.

The report for the St. Louis region, that includes most of Arkansas, also reported modest growth with retail activity expanding "at a modest pace."

Reports of activity in manufacturing were positive, the report said, with "several manufacturing firms [reporting] plans to add workers, expand operations or open new facilities."

Home sales were down across the St. Louis region and are down 6 percent in Little Rock through May, compared with the same period in 2013, the Fed reported, while the market for commercial and industrial real estate has improved.

The Fed's survey, known as the Beige Book, will be used by central bank officials when they next meet July 29-30 to review interest-rate policies.

Analysts expect that the Fed will decide to keep its short-term interest rate at a record low near zero and authorize another reduction in its bond purchases aimed at keeping long-term interest rates low.

Federal Reserve Chairman Janet Yellen, who spent two days delivering the Fed's twice-a-year policy report to Congress, emphasized before Senate and House committees that despite recent sizable gains in employment, the central bank is in no rush to withdraw the support it is providing to the economy.

The Fed has kept its benchmark short-term rate at zero since December 2008, and many analysts believe the first rate increase is still about a year away.

The Beige Book survey was compiled from information gathered by the Fed's 12 regional banks in the period before July 7. The report said consumer spending had increased in every district with auto sales generally stronger than other retail sales.

Tourism remained strong, with hotels in the Boston, New York, Atlanta and Minneapolis districts describing room demand as robust.

The report said many districts reported low inventories of homes for sale and rising home prices. But Boston, New York and St. Louis said sales were below year-ago levels.

All 12 districts reported job gains with several districts saying that businesses were reporting difficulties in filling positions for skilled workers. Aside from wage increases to attract certain skilled workers, the districts said wage pressures remained modest.

The Fed beginning in December started reducing its monthly bond purchases, which have been aimed at keeping long-term interest rates low. Yellen said this week that Fed officials expect to wrap up those purchases at the October meeting.

The Fed has repeated that the federal funds rate, the key short-term interest rate it controls, will likely remain near zero for a considerable time after the bond purchases end. Many officials don't expect the first rate increase to occur until next summer.

But Yellen did say in her testimony before the Senate and House banking committees that if labor market conditions continue to improve more quickly than the Fed is anticipating, the central bank could boost short-term rates sooner and more rapidly than expected.

Dallas Fed President Richard Fisher, who votes on policy this year, said in a speech Wednesday that the central bank may need to start raising rates "early next year, or potentially sooner depending on the pace of economic improvement." He said in Los Angeles that he's "increasingly concerned about the risks of our current monetary policy" in a "rapidly improving employment picture" and recent increases in inflation.

Information for this article was contributed by Jeff Kearns of Bloomberg News.

Business on 07/17/2014