Economy Expanding with Little Inflation By Tim Ahmann WASHINGTON (Reuters) - The U.S. economy expanded at a moderate pace from late January through February, with few signs of inflation despite rising production costs, the Federal Reserve said on Wednesday. "The economy has continued to expand at a moderate pace," the Fed said in its beige book summary of economic conditions. "Retail prices were generally flat or up modestly; however, businesses continued to face rising input costs, and a number of districts indicated greater ease in passing along price increases," the Fed said. Prices for U.S. Treasury bonds, already down sharply for the day, tumbled further as traders apparently took the reported increase in pricing power as a warning flag on inflation. The yield on the benchmark 10-year bond rose above 4.5 percent for the first time since July after the report. The report, drawn from the central bank's business contacts in each of its 12 districts, aims to give policy-makers an anecdotal look at the economy ahead of their next meeting on interest rates on March 22. The Fed is widely expected to increase overnight borrowing costs by a quarter-percentage point at that meeting and continue to push them higher through the spring and summer. In the beige book, the Fed said labor markets across the country have been steady to stronger, with overall wage gains moderate. A number of districts, however, cited larger pay increases in some industries and many saw scattered shortages of skilled labor. Manufacturers were said to be hiring in the Boston, Philadelphia, Cleveland, Chicago and Minneapolis regions, but factory employment was steady to down around Atlanta, St. Louis and Kansas City, the Fed said. "Manufacturing activity was reported as expanding solidly in most districts, although the pace of growth has generally not increased since the last report," it said, adding production of durable goods was particularly strong in many areas. "Despite the stability in consumer goods prices, manufacturers in a number of districts ... indicated that they have been finding it increasingly easy to pass along price increases," it added. The report also said businesses complained worker benefit costs continued to rise sharply, particularly the price of health insurance. Consumer spending was steady to slightly stronger, although some regions reported sluggish auto sales, the Fed said. It said retailers were mostly comfortable with current inventory levels and generally optimistic on future sales. "A number of reports from retailers indicated that apparel sold well, but others noted weak sales of electronics and big-ticket items," the Fed said. It described housing markets and home building activity were "as robust in most areas," but called commercial real estate markets "mixed." (Additional reporting by Mark Felsenthal, Editing by Chizu Nomiyama, Reuters Messaging: tim.ahmann.reuters.com@reuters.net; e-mail: tim.ahmann@reuters.com; 1 202 898-8370)) Quelle "Economy Expanding with Little Inflation" : reuters.com Main page for "Economy Expanding with Little Inflation"