Fed Report Says Economy Is ‘Excellent’

U.S. economic performance in May was “excellent,” with brisk production, ample jobs and low inflation, the Federal Reserve Board said Wednesday.

“The economy continues to grow in all Federal Reserve districts and across most sectors,” the Fed said in its “beige book” economic report, which will be used by Fed policymakers when they meet June 30-July 1 to consider interest rate strategy.

The report underlined the durability of the long-running U.S. expansion since the last recession in 1990-91 and noted that robust domestic demand appeared to largely offset weaker exports to Asia.

“Growth is fueled by liberal consumer spending and by business investment in plants and equipment,” the report said.

Fed policymakers have indicated they want to see some easing in demand to prevent inflationary pressures occurring as a result of rising wage costs. But most analysts doubt the central bank will raise interest rates, for fear of aggravating Asia’s economic distress.

“Overall, the U.S. economy continues its excellent performance,” according to the latest Fed summary, prepared by the Federal Reserve Bank of Minneapolis. The report updates one released May 6 and was based on interviews with businesses before June 8.

Seven of the 12 Fed districts reported some impact from Asia’s economic crisis, either in the form of reduced orders for U.S.-made goods or cheaper prices for imports from Asia.

The report said that while labor markets continued to be tight, there were no reports of widespread increases in wage levels.

Inventories, which had built up strongly in the first quarter, were generally described as “at normal levels relative to sales.”

Many economists have forecast that U.S. economic growth will slow from the first quarter’s booming 4.8% annualized rate, in part because of high inventories and weaker sales to Asia.

But there were only modest signs that manufacturing industries were scaling back significantly.