MercoPress. South Atlantic News Agency

“Modest increase” assessment on the US economy from the Federal Reserve

Fed chief Bernanke will be giving congressional testimony on Thursday

Economic growth in the United States picked up over the last two months and hiring showed signs of a “modest increase,” the Federal Reserve said in a report that ran counter to a growing sense of economic gloom.

“Overall economic activity expanded at a moderate pace,” the central bank said on Wednesday in its latest “Beige Book” summary of business activity covering a period between early April and late May.

The Fed's previous Beige Book assessment of the economy, released on April 11, had painted growth in a more timid light.

The central bank also described hiring as steady or modestly increasing, in contrast with a government report last week that showed hiring slowed last month for a fourth straight month.

The Beige Book, prepared this time by the Dallas Federal Reserve Bank based on information collected through May 25, is based on anecdotal reports from business people from coast to coast and will be used by Fed policymakers at their next meeting on June 19-20.

A number of Fed officials indicated over the last few days that their view of the outlook had not shifted enough to warrant a further easing of monetary policy. Congressional testimony by Fed Chairman Ben Bernanke on Thursday will give a clearer sense of whether the central bank's policy panel will hold off taking any new steps.

Separately, the Labour Department said business productivity fell more than expected in the first quarter as companies stepped up hiring sharply but only modestly expanded output.

Non-farm productivity slipped at a 0.9% annual rate. The decline was both sharper than the 0.5% initially reported and the 0.7% drop economists expected. It marked a turnabout from a 1.2% fourth-quarter gain.

US financial markets largely ignored the data, with stocks rising on signs European leaders were coming up with a plan to recapitalize Spain's troubled banks.

The Beige Book report also noted inflation pressures appeared to be modest, in part because of a decline in energy prices.