Most parts of the country logged moderate economic growth in the early spring, despite sluggish manufacturing largely due to the housing slump.
The fresh snapshot of the national economy, released Wednesday by the Federal Reserve, found that “manufacturing activity was slow” in many areas and that “residential real estate activity continued to weaken, with sales declining in many districts and flat in a number of others.”
Overall, most regions reported “only modest or moderate expansions,” the Fed said. There were some exceptions, though. The Minneapolis region reported “firm growth” and the Dallas region characterized economic activity as “moderately strong.”
Information from the survey will figure into discussions at the central bank’s next meeting on May 9. Many economists predict the Fed will continue to hold a key interest rate at 5.25 percent, where it has stood since last June. Before taking a breather, the Fed had steadily boosted rates for two years to ward off inflation.
On the inflation front, the Fed survey found that “consumer prices remained generally stable, with some districts experiencing only modest price increases.”
Still, businesses had to cope with higher prices for fuel and raw materials such as metals. As a result, some manufacturers in the Fed regions of Boston, Cleveland, Chicago and Dallas boosted prices to their customers, the report said.
Federal Reserve Chairman Ben Bernanke and his colleagues have said that the biggest risk to the economy is if inflation doesn’t recede as they currently predict. The hope is that inflation will ease as economic growth slows.
So far, the slowing economy hasn’t derailed the jobs market.
The Fed survey found that businesses in most regions reported strong demand for workers, especially for those with certain skills. However, workers for the most part saw modest wage gains, the report said.
The survey is based on information supplied by the Fed’s 12 regional banks and collected on or before April 16.
Economists believe the economy in the January-to-March quarter probably grew at a mediocre pace of around 1.8 percent.
That would be even slower than the 2.5 percent growth rate logged in the final three months of 2006 and the weakest performance since the final quarter of 2005, when the economy was still reeling from the blows of the Gulf Coast hurricanes. The government will report on first-quarter economic growth on Friday.
Many economists also predict economic growth will remain sluggish in the current April-to-June quarter.
In the survey, the Fed said weakness in manufacturing in the early spring was mostly related to fallout from the housing slump. The slump has reduced demand for some types of building materials, furniture, appliances and other things. Some areas said slower manufacturing activity was in part due to troubles in the automotive and other related industries.
While business investment has been lackluster, consumers continued to show their resilience.
The Fed survey reported that in most regions retail sales were “generally positive.” Clothing and spring merchandise were “strong sellers,” although some areas noted weak demand for home goods.