The US economy showed signs of faster growth during the past six weeks, including a pickup in manufacturing, the Federal Reserve said in its survey of regional economies.
"Reports from the twelve Federal Reserve districts provided additional signs that the pace of economic activity increased a notch during June and the first half of July," according to the report, known as the beige book. The survey found "generally more positive assessments of current economic activity" and "increased optimism about economic prospects in coming months." Eight of the 12 regional banks reported "somewhat stronger growth," the survey said.
"Nascent signs of a recovery emerged in manufacturing" as 10 of the Fed's 12 districts reported "mixed, steady or slightly improved conditions after an extended period of declines," the beige book said.
Still, the report said that consumer spending was "lackluster" and prices were "little changed," a condition that puts press on corporate profits.
Central bank policy makers will use the collection of economic anecdotes when they meet to set interest rate policy Aug.12. The Fed last month lowered its benchmark overnight bank lending rate to 1 percent, a 45-year low.
The beige book "paints a somewhat upbeat picture of economic growth but the improvement that it's suggesting falls well short of suggesting a robust growth pace," said Conrad DeQuadros, an economist at Bear Stearns Cos. in New York.
Just yesterday, the Conference Board said that US consumer confidence declined unexpectedly in July to the lowest in four months as Americans' view of their job prospects sank to the weakest in almost a decade.
The beige book dovetailed with recent comments from Fed officials, who predicted a stronger recovery.
Fed chairman Alan Greenspan earlier this month told lawmakers there are "tentative signs" the long slump in business investment is coming to an end.
In turn, a revival would "tend to further boost incomes and output," he said.
Industrial production rose for a second month in June, as durable goods orders surged the most since January, helped by spending on new capital equipment. Regional factory indexes from Chicago, New York, and Philadelphia have signaled growth the past two months.
"Price and wage inflation remained broadly in check" outside of health care, energy, transportation and insurance, the Fed said. Greenspan said the central bank is prepared to hold rates low, or push them lower, to avoid an unwelcome fall in inflation or a drop into deflation.
"There's nothing in the report that provided any support for the emergence of deflation pressure," said DeQuadros.
The core consumer price index, which excludes volatile food and energy costs, unchanged since last month.
The inflation gauge was up just 1.5 percent from June of last year. That matched April's 12-month change, which was the smallest since 1966.
The Federal Reserve Bank of Richmond prepared the report based on information collected before July 21.
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