Fed survey: Growth improves modestly throughout US

WASHINGTON (AP) -- A Federal Reserve survey says economic growth increased throughout the United States from April through late-May, fueled by home construction, consumer spending and steady hiring.

Eleven of the Fed's banking districts reported "modest to moderate" economic growth, according to the Beige Book survey released Wednesday. The 12th, in Dallas, reported strong growth.

The survey is based on anecdotal reports. The mostly favorable results of the latest survey suggest that the economy and the job market are improving despite tax increases and government spending cuts that took effect this year.

But the modest or moderate improvement reported for most regions appears to fall short of the strong and sustained growth that several Fed members have said is needed before the Fed starts tapering its bond purchases. Those purchases have helped keep interest rates at record lows.

"The Fed's Beige Book wasn't too downbeat, but it wasn't too upbeat either," said Jennifer Lee, senior economist at BMO Capital Markets. "It points to generally modest growth in the second quarter."

Manufacturing activity expanded in 10 districts, the survey noted. But there were concerns that government spending cuts might slow factory activity, particularly in defense industries.

Most districts reported gains in consumer spending during the survey period, but some said colder weather had slowed retail sales.

Home sales and prices increased throughout the country, and several districts noted that buyers were receiving multiple offers. Auto sales kept rising, too, although some districts reported shortages of used cars for sale.

Hiring was described as rising at a "measured pace," with a few districts reporting pockets of stronger activity.

The Fed has been assessing the job market's health in considering when to start scaling back its support for the economy, including $85-billion-a-month in Treasury and mortgage bond purchases. The information from the latest Beige Book will discussed along with other economic data at the Fed's next policy meeting on June 18-19.

Investors are paying closer attention to the Fed after minutes of the past meeting showed that several members favored reducing the bond purchases if the economy demonstrates strong and sustained growth. And Chairman Ben Bernanke told a congressional panel last month that the Fed could slow the pace of the bond purchases over the next few meetings, if the job market shows "real and sustainable progress."

Still, most of Bernanke's testimony last month focused on the many risks the U.S. economy still faces and the help the Fed's support programs have provided.

Recent economic reports have painted a mixed picture of the economy's health.

The housing recovery looks sustainable and the auto industry is on pace for another solid sales year. Both have benefited from the Fed's low interest-rate policies, which have helped make mortgages and loans cheaper.

Steady job growth and low inflation have allowed consumers to keep spending, even after higher Social Security taxes have reduced their paychecks this year.

Still, wages are barely increasing. A measure of U.S. factory activity fell in May to its lowest level since the last month of the Great Recession. And while the service sector is still growing, a closely watched survey of those firms showed many held back on hiring last month. Service firms have been the main source of job gains in recent months.

The government releases the May employment report on Friday. Economists forecast that employers added 170,000 jobs, roughly in line with April's pace, while the unemployment rate remained at a four-year low of 7.5 percent.

The overall economy grew at an annual rate of 2.4 percent in the January-March quarter but many analysts believe growth is slowing in the current April-June period to around 2 percent.