Fed survey finds modest growth in many regions

The economy grew modestly across most of the nation in April and early May as the solid housing recovery continued to offset a mixed picture for manufacturers while consumer spending grew modestly, the Federal Reserve said Wednesday.

While employment grew only modestly since the last report, “tight labour markets were widely reported” in most areas, according to the Beige Book. NY described activity as “generally flat”.

The survey collected anecdotal information on economic conditions before May 23, and was released two weeks before the USA central bank’s next policy meeting. Louis, Cleveland and Atlanta reported modest growth, it said. Three regions which indicated a slowdown.

The report found that the energy sector, which has been under pressure with falling prices, remained weak. Retailers reported increased competition from online stores, and noted that consumers are shying away from in-store shopping. Cleveland said that railroad activity was down by as much as 35 per cent from a year ago, while Richmond said that trucking and airline travel was uneven. It characterized the economy as slowly gaining ground, using versions of the word “modest” or “moderate” 23 times in the report’s six-page summary. But New York, Philadelphia, St. Louis and Kansas City said that manufacturing had declined, and San Francisco reported a flat reading for manufacturing. They suggested traders placed a 59 percent probability of a rate rise at the Fed’s July policy meeting, flat from Tuesday, CME Group’s FedWatch program showed. As of March, a majority of Fed officials anticipated an additional two quarter-percentage-point rate increases by the end of 2016.

Many private economists still believe a June rate hike isn’t very likely.

Federal funds futures for June delivery implied traders saw a 23 percent that the USA central bank would raise rates when it meets in two weeks, unchanged from Tuesday. Analysts believe a hike at the July 26-27 meeting is more realistic.

The Fed raised its key policy rate for the first time in almost a decade in December, pushing the rate from a record low near zero to a range of 0.25 per cent to 0.5 per cent. After raising rates in December, the committee has balked at a second increase because of worries over global growth and financial market turbulence.