The economy is growing at solid pace as the nation shakes off the effects of a stormy winter, the Federal Reserve said Wednesday in its survey of regional business activity.
Even in California, where the recession has been the most tenacious, "some positive signs are starting to emerge," the Fed said in a survey of economic conditions during March and April.The report could send some mixed signals on the outlook for inflation.
The Fed said competitive pressures are keeping the prices of most manufactured goods in check and retail pricing is generally stable to attract bargain-conscious shoppers.
But "price increases are reported for some raw materials," and production of cars and car parts, steel and building materials "is near capacity," the survey said.
The Federal Reserve has raised short-term interest rates from 3 percent to 3.75 percent since February, and most economists expect a boost to 4 percent when the central bank's policymaking Open Market Committee next meets on May 17.
For the previous five years, the Fed had been pushing short-term rates down to stimulate the economy but reversed course fearing inflation could be on the way.
In Wednesday's survey, concluded April 25, the Fed said, "Solid economic growth is reported in most parts of the country. Retail sales were strong in March, due in part to improved weather in many parts of the country."
The report said car sales were particularly strong and clothing sales improved.
Despite continuing weakness in the aerospace industry, the survey said factories overall are doing well.
The nation's farmers report good growing conditions generally as favorable spring weather took over in April.
Oil drilling is down, the Fed said, but drilling for natural gas remains strong.
The survey also said home sales activity is brisk in most parts of the nation and improving in the Northeast and California even with recent interest rate hikes.
In some areas, the rising rates have spurred a surge in home sales as buyers anticipate higher mortgage rates later this year.
Lending activity, particularly by consumers, has picked up, the Fed said. Its survey was conducted by the Fed's 12 regional banks.
It said production of autos, vehicle parts, steel and building materials was near capacity. Aerospace activity remained weak.
Money lending picked up, especially in the consumer area.