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. .
Still, 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.
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.
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 before April 4. The information will be used when Bernanke and his colleagues discuss the economy at their next meeting on April 26-27.
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