Economy shows modest expansion in Fed survey

The economy registered modest growth in the early summer as consumers and some businesses were buffeted by high gasoline prices and the sour housing market.

That’s the gist of a Federal Reserve region-by-region survey released Wednesday, which also showed that the economy has emerged from a rut at the beginning of the year and was now growing, albeit slowly.

On the inflation front, consumer prices continued to increase “at a moderate rate,” the Fed report said.

“Almost every region said that oil and gasoline prices were either rising, high or an issue,” it noted.

Gas prices have climbed past $3 a gallon nationwide.

Fed Chairman Ben S. Bernanke told Congress last week that he expected the economy to grow gradually this year and to strengthen a bit next year. He said inflation remained the chief concern.

The biggest threat to the economy is if inflation doesn’t recede as Fed policymakers anticipate, Bernanke explained when he delivered the Fed’s midyear economic assessment on Capitol Hill.

Information from the Fed survey will figure into discussions at the central bank’s next meeting, Aug. 7. Economists predict that the Fed at that time will again vote to hold a key interest rate at 5.25%, where it has stood for more than a year.

Consumer spending -- a major shaper of overall economic activity -- continued to grow in the early summer. However, a number of Fed regions reported that high gas prices restrained purchases.

The Fed survey noted that manufacturing activity grew in most Fed regions. And reports from around the country on spending for most business services were generally positive, the Fed said. Strong gains were noted by consulting, advertising, healthcare, scientific and telecommunications firms.

Employment, meanwhile, continued to increase “in most locations and in many sectors of the economy,” the Fed said. The nation’s unemployment rate is 4.5%, low by historical standards.

Even with the sturdy labor market, many regions described overall wage gains for workers as moderate. However, many also pointed out that there’s “significant upward pressure on wages and salaries” for high-skilled workers.

The survey was based on information supplied by the Fed’s 12 regional banks collected on or before July 16.