U.S. economic activity continues to expand, but conditions mixed: Federal Reserve

WASHINGTON – U.S. economic activity continued to expand in many districts from early January to late February but conditions varied considerably across regions and within sectors, the Federal Reserve said on Wednesday.

The decidedly mixed picture illustrates the headache Fed policymakers face once they next meet to determine the path of great interest rates on March 15-16.

Consumer spending increased within the most of districts, the Fed said in the Beige Book report of anecdotal information collected from business contacts across the nation.

Manufacturing activity was flat as it continued to hurt from a strong dollar, weak demand from the energy sector and a deteriorating global outlook.

Fed policymakers, who have to date held off raising interest rates further after a preliminary rise from near zero in December, will probably avoid another rate increase this month because they still assess just how much a slowdown in global growth, a tightening in financial conditions and lower inflation expectations will impact the U.S. economy.

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According towards the Beige Book, labour market conditions continued to improve but wage growth “varied considerably” across districts. Likewise, auto sales “varied significantly,” despite being at elevated levels, and consumer prices were generally flat.

The U.S. central bank said in December further rate hikes could be contingent in part on inflation making tangible progress towards its 2-per cent target rate.

Contacts in Cleveland, Boston and Chicago reported caution among customers to spend partly because of market volatility and also the latter two districts expressed “disappointment” consumers were not spending much more of their windfall from lower gas prices.

The Chicago Fed also noted “concerns about slower global economic growth had led to declines in equity markets, wider spreads for asset-backed securities, and an rise in financial market uncertainty.” The Dallas Fed said market and monetary policy uncertainty “had created concerns about 2016 growth prospects.”

Credit standards remained exactly the same for most districts, the Fed said. The Philadelphia Fed noted some tightening of standards, especially for energy-related industries.

In an optimistic sign for that Fed, wages generally increased. The St. Louis Fed reported its strongest assessment of wage development in two years, although some other districts saw easing wage pressures.

The Beige Book was published by the Might Fed with information collected before Feb. 22, 2016.

? Thomson Reuters 2016