Fed says expansion was moderate in May with steady hiring
The Federal Reserve said the U.S. economy was maintaining a moderate pace of growth as factory output rose and the real-estate market improved.
“Overall economic activity expanded at a moderate pace” from early April to late May, the Fed said in its Beige Book business survey, which is based on reports from its 12 district banks. “Hiring was steady or increased slightly.”
The report gives central bankers anecdotal evidence on the state of the world’s largest economy two weeks before they meet in Washington. Atlanta Fed President Dennis Lockhart said that an extension of the central bank’s Operation Twist program to reduce borrowing costs is “on the table” following data that showed job growth in May was the weakest in a year.
The Beige Book used language similar to the previous report in April, which said the economy “continued to expand at a modest to moderate pace” in all 12 Fed districts. That report also said that “hiring was steady or showed a modest increase across many districts.”
The leadership of the Fed will probably provide more clarity on their views before the June 19-20 meeting. Fed Vice Chairman Janet Yellen will speak tonight in Boston about the economic outlook, and Chairman Ben S. Bernanke will testify about the economy before Congress tomorrow.
“All options are on the table for the Fed,” Ellen Zentner, a senior economist at Nomura Holdings Inc. in New York, said before the report. “Clearly the downside risks have intensified, and the Fed will surely acknowledge that in the June statement.”
The Beige Book reflects information collected on or before May 25 and summarized by the Dallas Fed.
Manufacturing “continued to expand in most districts” and vehicle sales “remained strong,” the Beige Book said. Most districts reported gains in production or new orders, except for Philadelphia, Richmond and St. Louis.
The Fed said that “economic outlooks remain positive, but contacts were slightly more guarded in their optimism.” Manufacturers were concerned “that a slowdown in Europe and domestic political uncertainty may affect future business decisions.”
Several districts noted “consistent indications of recovery in the single-family housing market, although the recovery was characterized as fragile.”
The housing market, a laggard in the expansion, may be reviving after a six-year slump in which home prices, sales and construction collapsed.
Starts through the first four months of this year were 24 percent higher than the comparable 2011 period, and home values in 20 cities fell in the 12 months ended March at the slowest pace in more than a year.
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