Economic Growth Is Steady, Though Expected to Slow

Economic growth continued at a “moderate to strong” pace in March and April throughout much of the country, but the financial turmoil that has plagued East Asia since the fall is starting to brake U.S. growth, the Federal Reserve said Wednesday.

“Consumer spending was generally robust in all regions of the country. Manufacturing activity advanced. Real estate markets were generally strong,” the central bank said Wednesday in its “beige book” survey of regional economic conditions, based on reports from its 12 district banks.

Separately, the Commerce Department said factory orders rose modestly in March, but the first quarter of 1998 was a soft one overall as Asian financial turmoil dealt a setback to U.S. export sales.

Orders--a barometer of future production--increased 0.3% to a seasonally adjusted $336.2 billion following a 0.7% drop in February, the department said. Orders for the quarter as a whole are down 0.8% from the last three months of 1997.

The beige book report, named after the color of its cover, was compiled from reports submitted by the Federal Reserve Board’s 12 district banks. It will be used when Fed policymakers sit down May 19 to determine whether to raise short-term interest rates.

The Fed has been counting on fallout from the Asian financial crises to slow U.S. growth to a rate that won’t create increased inflation pressures. Wednesday’s beige book offered some evidence that’s occurring.

Moreover, it said, “despite increases in labor costs, business contacts indicated that competitive pressures were holding prices in check for most goods.”

Service prices rose in the San Francisco and Dallas districts.

The San Francisco district reported that the Western region’s economy grew at a “strong” pace during March and April, though there were reports indicating “moderate restraining effects” from Asia’s financial turmoil.