WASHINGTON — The U.S. economy improved in every region of the country this spring, but higher oil prices remain a concern, according to a survey released Wednesday by the Federal Reserve.
Factories were busier, consumers spent more and companies boosted hiring in all 12 of the regions surveyed by the Fed.
But the report also found that high energy prices are putting pressure on businesses to raise their prices. And workers are seeing limited, if any, pay increases because they lack leverage in market where jobs are still hard to find.
Scant wage gains are a major reason Federal Reserve Chairman Ben Bernanke says inflation won’t spread through the economy this year. That’s limiting businesses’ ability to raise prices, even though many companies are facing higher costs for raw materials.
The Fed’s report found that manufacturers are having an easier time increasing their prices to other businesses. But retailers have been more limited, fearing they might lose customers.
Bernanke and a majority of Fed officials also predict that the surge in oil prices will lead only to a modest and short-lived increase in consumer prices. But a vocal minority has in recent weeks raised concerns about inflation, saying it may soon time to consider raising record-low interest rates. Fed policymakers are expected to debate that at their next meeting on April 26-27.
Consumer spending picked up modestly in most of the Fed’s 12 regions, despite the higher gasoline prices. Shoppers, however, focused on necessities and lower-priced goods. Auto sales rose and tourism also strengthened in most areas.
Factories boosted production across most of the Fed’s regions, and many manufacturers increased hiring, the Fed survey found.
Hiring also improved in most Fed regions. Factories and high-tech companies were among the sectors adding jobs in many parts of the country. All Fed regions — except for Kansas City and St. Louis — saw job gains in February, according to separate research conducted by the Federal Reserve Bank of Dallas. The Kansas City and St. Louis regions had slightly fewer jobs from January.
Businesses remain mostly upbeat about future sales prospects, the Fed reported. Still, some said the earthquake in Japan could disrupt sales and production.
Many U.S. businesses depend on Japanese companies for parts, particularly automakers and electronics manufacturers. The crisis could also temporarily limit Japanese imports of U.S. goods.
The Fed’s report is based on information collected from its 12 regional banks from late February through early April. Known as the “Beige Book,” the survey provides a more in-the-trenches look at the overall economy than broad statistics. The survey is released eight times a year. Information from the latest survey will be discussed at the Fed’s April meeting.