Federal Reserve Sees Growth in All 12 Regions
The U.S. economy expanded in January and early February in all parts of the country, but businesses reported they are under pressure to raise their prices, the Associated Press reported.
A Federal Reserve survey released Wednesday (March 2) showed that all 12 of the Fed’s regions reported growth at a “modest to moderate pace” and it pointed to a pickup in job creation in each.
Retail sales picked up in 10 of the 12 regions, while falling in the Richmond and Atlanta areas. Factory activity rose in all districts except St. Louis.
The survey hinted at some inflationary concerns. Costs are rising for manufacturers and retailers in most areas. Manufacturers in many districts said they are increasingly able to pass on those costs to customers. Retailers in some districts said they have or soon will raise prices.
“There are beginning to be some troubling signs on inflation,” said Steven Wood, chief economist at Insight Economics.
But other economists noted that the survey found little evidence that wages are increasing. Accelerating wages are “a necessary condition for a sustained, destabilizing high-inflation episode,” said Dana Saporta, an economist at Credit Suisse Securities.
Federal Reserve Chairman Ben Bernanke endured tough questioning from members of Congress on Tuesday and Wednesday about the threat of rising inflation. Lawmakers raised concerns that the Fed’s $600 billion bond-purchase program is laying the groundwork for higher prices.
Those concerns have been heightened by recent run-ups in the price of oil, corn, wheat and other commodities.
Bernanke told members of Congress that higher oil prices, which have risen due to turmoil in the Middle East, would likely cause only a temporary and mild increase in inflation.
The U.S. economy has been growing for 18 months. But that expansion hasn’t been enough to significantly lower the nation’s unemployment rate, which was 9% in January. The federal government will release the February jobs report on Friday.
The Fed survey did note that the job market is picking up in all districts. Many districts reported improved hiring in the manufacturing and health care industries.
Seven districts said that staffing agencies are more optimistic, with more employers converting temporary jobs to permanent status. Permanent hiring is also picking up, the agencies said.
The survey also noted that wages remain steady in five districts and are rising only modestly in several others. Sluggish wage growth should act to restrain future price increases.
Harsh snowstorms in many different parts of the country reduced store sales and factory activity. Bad weather disrupted manufacturing in the Cleveland, Atlanta and Minneapolis regions, and pushed down retail sales in six districts.
Housing remains the economy’s main weak spot, the report showed.
“Overall sales and construction remained at low levels across all districts,” the survey said. The St. Louis region said sales are still declining.