Fed Beige Book: USA economy expands at moderate pace, fueled by consumer

The report will be used as a basis for discussion in the Fed’s monetary policy meeting on October 27-28.

As a few parts of the nation see stronger economic conditions, it may be fueling a divide between how regional Fed bank presidents and a few members of the Fed’s Board of Governors in Washington view the strength of the expansion. In particular, the steel sector remained weak, as the dollar’s appreciation increased import competition, especially from China.

The Fed’s report echoes other recent data that suggests the economy, while still expanding, has run into headwinds from overseas and lost momentum.

The Federal Reserve’s Beige Book indicated a few slowing in the economy, with two of the 12 districts reporting that the pace of growth had slowed from mid-August until early October and one noting an overall decline in activity.

However, consumer spending grew moderately, led by stronger gains in auto sales and services activity, which accounts for most of U.S. output, mostly strengthened.

Labor markets also tightened in most districts, and a few companies reported labor shortages, particularly for skilled workers. Boston and Richmond reported that activity had increased, while Kansas City noted a slight decline.

Fed Chairwoman Janet Yellen said last month she expected the first rate increase to occur before the end of the year.

The projections come at a time when investors and economists are speculating about when the Fed will raise interest rates for the first time since June 29, 2006.

But new doubts emerged this week among the top ranks of the Federal Reserve.

In contrast, two Fed governors, Lael Brainard and Daniel Tarullo, urged patience in raising the benchmark federal funds rate in comments this week.