Fed sees moderate growth in country

Most parts of the country showed moderate economic growth in the early spring despite sluggish manufacturing largely due to the housing slump.

The fresh snapshot of the national economy, released Wednesday by the Federal Reserve, found manufacturing activity slow in many areas. Activity in residential real estate continued to weaken.

Overall, most regions reported "only modest or moderate expansions," the Fed said. But the Minneapolis region posted "firm growth" and the Dallas area characterized economic activity as "moderately strong."

Information from the survey will figure into discussions at the central bank's next meeting, on May 9. Many economists predict the Fed will continue to hold a key interest rate at 5.25 percent, where it has stood since June.

"Nothing in the report would suggest any urgency on the Fed's part to move in either direction," said T.J. Marta, fixed income strategist at RBC Capital Markets.

Before taking a breather, the Fed steadily had boosted rates for two years to ward off inflation.

On the inflation front, the Fed survey found consumer prices generally were stable and modest price increases in some areas.

Still, businesses had to cope with higher prices for fuel and raw materials such as metals. As a result, some manufacturers in the Fed regions of Boston, Cleveland, Chicago and Dallas raised prices to their customers, the report said.

Federal Reserve Chairman Ben Bernanke and his colleagues have said the biggest risk to the economy is if inflation does not recede, as they currently predict. The hope is that inflation will ease as growth slows.

So far, the slowing economy has not derailed the jobs market.

The survey found that businesses in most regions reported strong demand for workers, who for the most part saw just modest wage gains.

The survey is based on information supplied by the Fed's 12 regional banks and collected on or before April 16.

Economists believe the economy in the January-to-March quarter probably grew at a mediocre pace of about 1.8 percent.

Over the final three months of 2006, the rate was 2.5 percent. The forecast 1.8 percent rate would amount to weakest performance since the final quarter of 2005, when the economy was reeling from the Gulf Coast hurricanes.

On Friday, the government will report on first-quarter economic growth.

Many economists are predicting growth will remain sluggish in the current April-to-June quarter.

In the survey, the Fed said weakness in manufacturing in the early spring was related mostly to fallout from the housing slump. The slump has reduced demand for some types of building materials, furniture, appliances and other things. In some regions, the slower manufacturing activity was attributed partly to troubles in the automotive and other related industries.

While business investment has been lackluster, consumers continued to show their resilience.

The Fed survey reported that in most regions retail sales were generally positive. Clothing and spring merchandise were "strong sellers," although some areas noted weak demand for home goods.

___

On the Net:

Federal Reserve: http://www.federalreserve.gov/