The U.S. economy continued to expand across most of the country in February and March, though a strong dollar, falling oil prices and harsh winter weather slowed activity in some sectors, according to the Federal Reserve’s latest survey of regional economic conditions.
The Fed found modest or moderate growth in eight of its 12 districts, according to the so-called beige book report released Wednesday. Elsewhere, the pace of economic activity was described as steady, slight or continuing to expand.
The survey, covering mid-February through the end of March, was released ahead of the Fed’s April 28-29 policy meeting in Washington. Fed officials are weighing when to begin raising short-term interest rates from near-zero, where they have held since December 2008.
No move is expected in April and Fed officials at their last meeting were divided on whether they might raise interest rates this summer. Minutes of the March meeting showed “several” officials thought June would be the right time, though others said it would be better to wait.
Recent soft economic data could complicate their decision. The labor market and consumer spending appeared to stumble last month, while inflation has remained persistently below the central bank’s 2% target.
Wednesday’s report highlighted several crosscurrents in the economy, including layoffs in the energy sector but also signs of stronger consumer spending–both related to cheaper energy prices.
“Layoffs in the manufacturing and energy sectors were reported in multiple Districts including Cleveland, Atlanta, Minneapolis, Kansas City, and Dallas,” the Fed report said. “These reductions were primarily related to the decline in gas and oil prices and the resultant decline in upstream demand such as iron ore mining and steel manufacturing.”
In some areas, manufacturers also complained about a stronger dollar–which can hurt exports–and bad weather.
But demand for skilled workers remained strong in other sectors and some districts saw “modest or moderate” signs of wage pressure.
“Difficulty finding skilled workers was frequently reported,” the Fed report said.
The economy may pick up further as the effects of a bad weather are shoveled aside.
The Fed report said tourism and business travel are rebounding from the tough winter and contacts expect growth for the rest of the year.
“Many districts noted that savings from lower energy prices are helping to drive retail sales this cycle, as is the improving weather situation, ” the report said.