The Fed survey shows growth in each of its 12 bank districts from April 3 through May 25. Growth was moderate or modest in 10 districts, steady in the Boston district, and slowed in the Philadelphia region.
Hiring was steady or rose modestly, according to the Fed's report, known as the "Beige Book." That's in stark contrast to the government's jobs report last week, which said employers added the fewest jobs in a year in May and the unemployment rate ticked up to 8.2 per cent from 8.1 per cent in April.
It was the second positive reading on the economy this week. On Tuesday, a private survey found that the service sector expanded at a slightly faster pace than the previous month. The industries surveyed cover about 90 per cent of the economy and include health care, retail, construction and financial services.
The Dow Jones industrial average was up more than 200 points in afternoon trading, extending its first two-day winning streak since late April.
The survey was mostly positive. Manufacturing and home sales improved in most districts, as did residential and commercial construction. Auto sales were strong in most areas. And businesses sought more loans, which could signal expansion plans. Small and medium-sized banks in the New York district reported the most broad-based increase in loan demand since the mid-1990s.
But the survey also pointed to some weakness in the economy. Consumer spending was flat or increased only slightly in almost all districts. That could restrain growth because consumer spending drives 70 per cent of economic activity.
Americans received little in the way of pay raises. Weak wage growth could also dampen consumer spending in the coming months.
Still, gas prices have dropped sharply since peaking on April 6. That could allow consumers and businesses latitude to spend more freely.
The Beige Book is released eight times a year and is based on surveys by the Fed's 12 regional banks. There are no numbers in the report. But its findings, which are released two weeks before the Fed's policy meeting, help influence the discussions.
Those discussions may be especially contentious when the Fed's board meets June 19-20. Last week's disappointing jobs report has heightened pressure on the central bank to take steps to accelerate growth and hiring.
Some Fed policymakers, who believe inflation is largely in check, may favour new stimulus measures. But other Fed officials fear that low interest rates and the central bank's previous bond-buying programs could soon push up inflation. They will likely resist any new steps.
The Fed will also have to grapple with recent changes in the economic outlook. At its last meeting in late April, Fed policy makers slightly upgraded their forecasts. They projected growth at about 2.7 per cent this year, up from 2.5 per cent in January. They also nudged down their unemployment rate forecasts to just below 8 per cent.
Wall Street economists, however, have since moved in the other direction, particularly in light of the dismal jobs report. Many now expect the economy to expand by only about 2 per cent this year, down from earlier estimates of 2.5 per cent.
Several other pessimistic reports were released last week. Manufacturing activity slowed last month, consumer confidence tumbled and a gauge of future home sales fell. Americans' incomes grew in April at the weakest pace in five months.
And the government said the economy expanded at a tepid 1.9 per cent annual rate in the first three months of 2012. That's down from 3 per cent in the fourth quarter.Suggest a correction