WASHINGTON — The U.S. economy was growing at a moderate pace in December and early January, helped by gains in sales of autos and other consumer products, but a big drop in oil prices was starting to have an impact in Texas and other energy regions, the Federal Reserve reported Wednesday.
The Fed said business contacts in its 12 regional banking districts were seeing "modest" or "moderate" growth. General merchandise retailers in the New York area reported largely sluggish holiday sales while high-end merchandise in Philadelphia and San Francisco did well.
Payrolls grew in a variety of sectors but significant wage gains were seen only by workers with specialized technical skills.
The Fed report, known as the beige book for the color of its cover, will form the basis of discussion at the Fed's next meeting on Jan. 27-28. The Fed at its last meeting in December said it expected to remain "patient" as it decides when to begin raising interest rates.
Many economists say the country's moderate growth will allow the Fed to stay patient through the first half of this year with June the most likely date for the first increase in its benchmark rate, which has been at a record low near zero for the past six years.
Analysts said the latest beige book struck a more subdued tone than the December report, noting that holiday sales were disappointing in many regions. A government report Wednesday showed that retail sales fell 0.9 percent in December, the biggest drop in 11 months.
Jennifer Lee, senior economist at BMO Capital Markets, said the new Fed report was more muted than the December survey.
The Fed's "business contacts suggest that while economic activity continued to expand in the New Year, the pace slowed," she said in a research note.
The new report, based on interviews with business contacts around the country, found several indications that the recent sharp slide in oil prices was starting to have an impact on the economy.
The Dallas Fed said that some energy firms in its district were reporting hiring freezes and layoffs with demand for oilfield services falling.
"Outlooks for the first half of 2015 are very uncertain and significantly weaker than the prior reporting period," the Dallas Fed said. It said oilfield service firms were expecting anywhere from a 15 percent to 40 percent decline in demand for their services.
Many private economists believe the big drop in oil prices will provide a boost to the overall economy by giving consumers more money to spend on other products but they have cautioned that energy-producing regions could suffer from job cutbacks.
The Atlanta Fed said that lower gas prices had boosted the sales of larger vehicles but the St. Louis Fed said that some auto dealers in its region were seeing excess inventories of luxury cars.
The Fed said that reports of rising wage pressures were less prevalent in the latest survey than in its previous report although there was continued upward pressure for high-skilled labor in such areas as high-tech.
Various tourism contacts reported a brisk business with Broadway theaters in New York City saying that attendance and revenues were 10 percent higher than a year ago. Tourism was also reported up in the Richmond and Kansas City regions but ski resorts in the Philadelphia Fed district were struggling to attract visitors in the midst of unseasonably warm weather in December. The warm weather was also having an impact on winter tourists in the Minneapolis region.