Crop conditions were described as “promising in many districts”, though “low commodity prices continued to put pressure on agricultural incomes”.
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The report came before the Federal Open Market Committee, the Fed’s policy body, meets on June 14-15 on whether to raise interest rates for the first time since December.
Short-term yields rose after the Institute of Supply Management reported a rise in its index of USA manufacturing activity, with a reading of 51.3 for May, and gained further after the Fed’s Beige Book economic report indicated that inflation pressures grew slightly across most of the United States from April to mid-May.
Rising wages are seen by many economists as a harbinger of faster rates of inflation. 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. But two districts Chicago and Kansas City said growth had slowed from the past report. Louis, Cleveland and Atlanta reported modest growth, it said. Manufacturing results were reported as mixed, while the energy industry, still ailing form the decline in the price of oil, remained weak.
More generally, the Fed reported modest or moderate economic growth in the majority of its 12 districts.
Economic data have shown steady if unspectacular improvement in the USA following a disappointing first quarter.
Consumer spending was up in about half of the districts, the Beige Book said.
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As has been customary since the 2007-2009 recession, the Beige Book described economic growth as modest. The Federal Reserve Bank of Minneapolis prepared the current report. It summarizes comments received from businesses and other contacts outside the Fed system.
