The Dallas Fed said manufacturing increased, retail sales improved and auto sales “held steady,” the report said. Demand for accounting services was “strong,” while law firms reported modest growth, transportation firms said conditions improved and housing sales and construction gained. The district includes Texas, northern Louisiana and southern New Mexico.
The Federal Open Market Committee said at its most recent meeting it will continue buying $85 billion in bonds each month until the labor market “improves substantially.” The committee also pledged on May 1 to keep the main interest rate near zero so long as the unemployment rate remains above 6.5% and the forecast for inflation doesn’t exceed 2.5% over one to two years.
Chairman Ben S. Bernanke, in May 22 testimony to Congress, said that the Fed “could” scale back the pace of asset purchases in the “next few meetings” if the labor market improves and the Fed is convinced the gains are sustainable.
St. Louis Fed President James Bullard and Boston’s Eric Rosengren have raised the prospect that the central bank could increase the monthly pace of asset purchases.
Bullard said May 23 in London that more disinflation could prompt additional purchases, and Rosengren said May 29 in Minneapolis that “if the incoming economic data do not reflect improvements consistent with both elements of our dual mandate, I believe the Fed should be willing to increase asset purchases,” referring to the central bank’s goals to achieve stable prices and full employment.
Federal Reserve Bank of New York President William C. Dudley is among policy makers who want more time to evaluate the strength of the economy.
“I don’t really understand very well how the tug-of-war between the fiscal drag and the improving economy are going to sort of work their way out,” Dudley said in an interview on Bloomberg Television that aired May 22. “Three or four months from now I think you’re going to have a much better sense of, is the economy healthy enough to overcome the fiscal drag or not.”
Consumer spending in the U.S. unexpectedly declined in April for the first time in almost a year as incomes stagnated, indicating that the largest part of the economy will struggle to pick up without bigger job gains.