us growth modest strong dollar weighs
Last Updated : GMT 07:27:58
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US growth 'modest', strong dollar weighs

Arab Today, arab today

Arab Today, arab today US growth 'modest', strong dollar weighs

The labour market
Washington - AFP

The strong dollar weighed on manufacturing and tourism spending in the US while the economy continued "modest expansion" in recent weeks, the Federal Reserve said in a report Wednesday.

Eleven of the central bank's 12 districts reported growth, according to the Beige Book survey of economic conditions from mid-August through early October.

One district hit hard by the fall in oil prices, the Kansas City region, reported a slight dip in economic activity.

The Beige Book, a collection of anecdotal information, said that a number of districts cited the strong dollar "as restraining manufacturing activity as well as tourism spending."

However, consumer spending, driver of two thirds of the US output, grew moderately, led by sharper gains in auto sales.

Nonfinancial services activity mostly strengthened and the housing market, which has been a bright spot in the economy, improved.

Overall, the report was upbeat about the economy. "Business contacts across the nation were generally optimistic about the near-term outlook," the Beige Book said.

But there were pockets of concern. Manufacturing generally weakened, in part due tot he downturn in energy sector activity in a number of districts.

Though there was some strength in the auto, aerospace and transportation equipment industries, metals industries were hit by the strong dollar and competition from China.

- Dollar drag -

The Fed report was sprinkled with references to the strong dollar's negative impact, whether in manufacturing, ports or in New York, where it "has adversely affected sales, particularly in areas frequented by foreign shoppers."

In Montana, on the border with Canada, Canadian tourist spending fell as much as 15 percent because of the greenback's appreciation.

In the Dallas district, petroleum products exports suffered slightly from the currency headwind.

The stronger greenback also heightened the competition from Chinese imports, steel industry officials in several districts said.

In the agriculture sector, in addition to the dollar's restraints on exports, some producers have not yet adjusted crop plans to account for the slowdown in the Chinese economy, the report said.

The Fed decided at its September policy meeting to leave its federal funds rate near zero, where it has been pegged for nearly seven years, citing concerns about the potential impacts to the US economy from China's slowdown and the strong dollar.

"While the tone of the report was somewhat more upbeat than recent economic reports, it was not likely upbeat enough to alter expectations for no rate hike in October and only a 50/50 (at best) chance of a hike in December," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange, in a research note.

The signs for the central bank's dual mandate of maximum employment and price stability were little changed in the latest Beige Book.

The labor market, which has moved toward the Fed's mandate with an unemployment rate at 5.1 percent, tightened in most districts. There were areas of labor shortages, especially for skilled workers.

But tepid wage growth, a key worry of the Fed as a sign of remaining slack in the market, was "mostly subdued" except for pockets of increased wage pressures.

Prices were little changed "or up only slightly" in most districts, it said.

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