Fed Sees Strong Growth, Limited Price Increases

Expanding manufacturing activity and mounting retail sales, paced by consumer electronics and home furnishings, are still producing strong growth in the U.S. economy with only limited consumer price increases, the Federal Reserve reported Wednesday.

The Fed survey, compiled from reports from its 12 regional banks, also said labor markets remain tight around the country. That means employers are having difficulty finding workers to fill job openings, something that economists fear could lead to wage and price inflation.

But “despite faster wage growth for some workers, increases in the prices of final goods and services were limited overall,” the Fed said.

The survey, known as the “beige book” for the color of its cover, will be used when Fed policymakers meet March 21 to review the central bank’s stance on interest rates. The beige book was based on information collected before Feb. 29.

Many economists believe the Fed will boost rates again at that meeting in another effort to slow economic growth to a pace that will keep inflation in check. The central bank has raised rates four times since June, for a total of a full percentage point, to 5.75%, making borrowing more expensive for millions of consumers and businesses.

Economists said those actions have had little impact on cooling the red-hot economy, which grew at a breakneck 6.9% annual rate in the last three months of 1999.

Fed Chairman Alan Greenspan on Monday expressed new worries about an overheated economy and sounded a warning that interest rates will be raised if the economy doesn’t slow.

In the manufacturing sector, most districts reported a pickup in activity in January and February, the Fed said. “The gains were moderate in general, although [the Richmond Federal Reserve Bank’s] report indicated considerable strengthening.”

Sales of semiconductors and other high-tech equipment were strong in the San Francisco and Dallas districts, the survey said. Demand for a variety of other manufactured products grew substantially, including metal products, electronics and furniture.

On the retail front, the Fed found sales were strong in most areas and either met or exceeded merchants’ expectations.

Sales of consumer electronics, appliances and home furnishings posted the biggest gains.