The economy grew modestly the past six weeks, with consumer spending and the housing market accelerating while a strong dollar and low oil prices continued to hamper manufacturers, the Federal Reserve said Wednesday.
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Nine of the 12 Fed districts reported modest or moderate growth, compared with 11 in the previous report.
The USA central bank said manufacturing conditions were “generally sluggish” with the slowdown in China taking a back seat to the stronger dollar as the most immediate headwind. Boston and Richmond reported that activity had increased, while Kansas City noted a slight decline. “Business contacts across the nation were generally optimistic about the near-term outlook”, the Beige Book said.
Fed Chairwoman Janet Yellen said last month she expected the first rate increase to occur before the end of the year.
Concerns about stubbornly low inflation and deteriorating jobs growth caused two voting members of the Fed’s rate- setting committee – Fed Governors Lael Brainard (http://www.marketwatch.com/story/feds-brainard-joins-the-doves-2015- 10-13)and Daniel Tarullo (http://www.marketwatch.com/story/feds-tarullo-says-he-doesnt-expect-to-raise-interest-rates- this-year-2015-10-13)- to warn against a premature rate increase during speeches earlier this week.
“While the tone of the report was somewhat more upbeat than recent economic reports, it was not likely upbeat enough to alter expectations for no rate hike in October and only a 50/50 (at best) chance of a hike in December”, said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange, in a research note.
Prices were little changed “or up only slightly” in most districts, it said. Oil and gas drillers are also ordering less steel pipe and other equipment, dragging down factory output, according to many districts.
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Emerging-markets currencies also put in a strong performance Wednesday, with several – including the Brazilian real, South African rand and the Turkish lira – rising almost 2% against the dollar.
