The economy expanded at a “modest to moderate” pace in 11 of 12 Federal Reserve districts, with broad-based gains ranging from business services to construction and manufacturing, the central bank said today.
“Hiring increased at a measured pace in several districts, with some contacts noting difficulty finding qualified workers,” the Fed said in its Beige Book business survey, which is based on reports from its regional banks. Growth in the Dallas Fed district was described as “strong.”
Fed officials will consider the report as they continue a debate on when to start curtailing the pace of bond purchases. Officials, who next meet June 18-19, are weighing whether gains in employment are substantial enough to warrant reduced stimulus, and how much the world’s largest economy is being held back by federal budget cuts.
“Most districts noted slight to moderate gains in consumer spending and a moderate increase in vehicle sales,” according to today’s report, which was compiled by the Minneapolis Fed.
Stocks and Treasury yields remained lower after the report. The yield on the benchmark 10-year Treasury note fell six basis points, or 0.06 percentage point, to 2.09% as of 2:29 p.m. in New York. Yields are down from a one-year high of 2.17% on May 28. The Standard & Poor’s 500 Index retreated 1.4% to 1,608.08.
Manufacturing increased across most regions as residential construction “was a boon” to suppliers, and four districts reported increased demand for lumber or wood products, the Fed report showed. The New York region reported “steady business activity” in manufacturing, and Boston firms said they’re “reasonably optimistic about the outlook.”
Vehicle sales “generally increased” across the nation while tourism showed “signs of strength” in several areas, the Fed said today. Nonfinancial business activity increased amid rising demand for technology, architecture, accounting and legal services.
Government spending cuts were a drag on the economy in some districts. Defense contractors noted “weakening activity” in the Cleveland region, and a military supplier in Richmond’s district reported that orders were being canceled or delayed.
The previous Beige Book report, released April 17, said that “overall economic activity expanded at a moderate pace.” That report showed gains in manufacturing, housing and autos that offset weakness in defense-related industries in some regions.