WASHINGTON -- The Federal Reserve said Wednesday that the economy grew at a modest pace in much of the country from April to mid-May, despite headwinds ranging from slower consumer spending to ongoing weakness in the manufacturing and the energy sectors.
The Fed's latest survey of business conditions found that half of its 12 regions described growth as modest, while Dallas said economic activity had increased "marginally." Two districts -- Chicago and Kansas City -- said growth had slowed from the past report. New York described activity as "generally flat."
The report will provide the basis for a discussion on the economy at the Fed's upcoming meeting on June 14-15. The information in the new Fed survey could be cited as a reason to hold off on a rate hike.
Fed Chair Janet Yellen said Friday that an interest rate hike would be appropriate in the coming months if the economy kept improving. In an appearance at Harvard, Yellen said that while economic growth was relatively weak at the end of last year and the beginning of this year, the economy appeared to be picking up based on recent data.
But various reports are still painting a mixed picture. The government on Tuesday reported that consumer spending surged in April, but a separate report Wednesday showed that construction spending suffered widespread setbacks in the same month.
The Fed business survey, known as the Beige Book, also presented a mixed view of conditions. It was based on readings from the 12 Fed regional banks that were collected before May 23.
In San Francisco, economic activity was expanding at a "moderate" pace. Meanwhile, six regions -- Philadelphia, Cleveland, Atlanta, Chicago, St. Louis and Minneapolis -- reported slightly less upbeat "modest" growth. Three regions which indicated a slowdown.
Consumer spending, which accounts for 70 per cent of economic activity, dampened some areas. Three districts -- Boston, New York and Philadelphia -- said cool spring weather had curtailed retail sales compared to last year, while a number of districts reported mixed or flat activity for the period.
A number of retailers reported increased competition from online sales.
In the services sector, technology and professional services in many regions reported gains, but transportation was under pressure in some areas. Cleveland said that railroad activity was down by as much as 35 per cent from a year ago, while Richmond said that trucking and airline travel was uneven.
In manufacturing, Cleveland, Chicago and Minneapolis reported modest increases. But New York, Philadelphia, St. Louis and Kansas City said that manufacturing had declined, and San Francisco reported a flat reading for manufacturing.
Anticipation of a rate hike at either the next June meeting or in July has been rising since the Fed released the minutes of its discussions at its April meeting. The minutes showed that Fed officials believed the strengthening economy might warrant a rate hike in June.
Many private economists still believe a June rate hike isn't very likely.
The gathering will take place only a week before British voters decide whether to support a move to leave the European Union. The Fed may be reluctant to raise rates in advance of the British vote. The analysts believe a hike at the July 26-27 meeting is more realistic.
Yellen is scheduled to speak on the economy and interest-rate policy in Philadelphia on Monday.
The Fed raised its key policy rate for the first time in nearly a decade in December, pushing the rate from a record low near zero to a range of 0.25 per cent to 0.5 per cent.
But after increased global weakness and financial market turmoil in January and February, the Fed has kept rates unchanged so far this year. The Fed indicated in March that it was trimming its estimate of possible rate hikes this year from four to just two.
