Tags: Energy | Costs | Economy | Fed

Energy Costs Raise Concerns on Growing Economy, Fed Report Says

Wednesday, 11 April 2012 02:10 PM

U.S. economic activity kept expanding moderately in the late winter months but rising energy prices were beginning to worry manufacturers and retailers across the country, the Federal Reserve said on Wednesday.

"Reports from the 12 Federal Reserve districts indicated that the economy continued to expand at a modest to moderate pace from mid-February through late March," the central bank said in its latest "Beige Book" summary of national activity.

Positive signs, it said, included steady hiring and shortages of skilled workers in many areas as well as robust new-vehicle sales that were stimulating more manufacturing activity.

Editor's Note: You Deserve to Know What Obama and Bernanke Are Hiding From Americans

But costlier energy and rising gasoline prices cast a shadow over prospects, the Fed summary said.

"While the near-term outlook for household spending was encouraging, contacts in several districts expressed concerns that rising gas prices could limit discretionary spending in the months to come," it added.

The report, based on data collected before April 2, comes from business contacts in each of the 12 districts that have regional Fed banks and is thus seen as a real-life complement to the more academic speeches and analyses that flow from the central bank.

It reflected a degree of caution about rising energy prices that seemed to be borne out in Labor Department data on Wednesday showing that imported petroleum costs were still on the rise.

March import prices climbed by the most in nearly a year on sharply higher petroleum costs, the Labor Department said.

Imported petroleum prices alone increased 4.3 percent, the biggest gain since April 2011.

That helped drive overall import prices up 1.3 percent for the biggest monthly gain since April 2011, the Labor Department added.

Economists polled by Reuters had expected import prices to rise 0.8 percent last month. February's data was revised to show a 0.1 percent decline instead of the previously reported 0.4 percent increase.

The data underscores the size of the price shock that is stinging Americans when they refuel their cars.

There are ample signs that higher gasoline prices are a weight on the U.S. economy, still burdened by high unemployment and a soft housing sector following the 2007-2009 recession.

Applications for U.S. home mortgages fell last week despite a drop in the average interest rate for 30-year mortgages, the Mortgage Bankers Association said in a separate report on Wednesday.

As for export prices, the Labor Department report showed they rose 0.8 percent last month, above analysts' expectations for a 0.4 percent gain. Export prices increased 0.4 percent in February.

Markets showed little reaction to any of the day's data. Stock prices were higher at mod-afternoon but that followed five days of losses. Treasury debt prices were lower.

Higher prices for energy have fueled inflation in recent months but a still-weak jobs market has made it harder for businesses to pass those costs on to consumers.

A report last week showing slower job growth in March has fueled speculation the U.S. Federal Reserve could ease monetary policy further. Most major Wall Street firms expect the Fed to launch a third round of bond buying, a Reuters poll found on Monday.

U.S. data scheduled for release on Thursday is expected to show tame price pressures at a wholesale level, with producer prices seen rising 0.2 percent in March when stripping out food and energy.

Editor's Note: You Deserve to Know What Obama and Bernanke Are Hiding From Americans

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Wednesday, 11 April 2012 02:10 PM
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