Higher interest rates and a sharp drop in technology stocks did little to obstruct the nation's energetic pace of economic growth in March and April, the

Federal Reserve

reported Wednesday in a widely followed periodic summary of the economy.

In its "Current Economic Conditions" report, the Fed said the economy was driven by strong consumer demand, robust construction, high output from factories, more widespread oil drilling and a healthy start to the farming season.

The report is commonly referred to as the

Beige Book because of the color of its cover.

The Beige Book noted that the country is enjoying the spoils of a roaring economy. One benefit to many consumers has been the climbing stock market, and the actual and paper wealth it has created for many. That has given confidence to consumers, who account for roughly two-thirds of the country's economic activity, and intensified the overall strength of the expansion.

But the report seemed to suggest that a substantial pullback in technology stocks in March and April, which brought the


composite index from its highs above 5000 down to 3200 in less than a month, was not nearly enough to have any measurable impact on the economy.

"District reports generally indicated that recent volatility in equity markets had not had an impact on activity as of the time of this report, although it altered some contacts' expectations," the Beige Book stated.

It also said inflation, the ill side effect of growth, is creeping into the system. That could be worrisome for both investors and policymakers, who fear that inflation might eventually heighten the risk that the nearly 10-year-old U.S. economic expansion will end.

In its attempts to slow economic growth and thwart inflationary influences, the Fed has raised interest rates five times, in 0.25 percentage point increments, since last June. In theory, higher rates slow economic activity by making it harder for businesses to borrow and spend. But Wednesday's Beige Book, along with other gauges of the economy, are evidence that the economy is still screaming ahead with almost no sign of slowing.

One of the most prominent drivers of the economy has been the booming job market, the report said. Amid a shrinking pool of workers, businesses have had to do everything they can to find and keep employees, including raising wages and benefits. As wages move higher, businesses will eventually have to pass on the costs through higher prices for their goods and services, leading to inflation.

So far, however, prices at the consumer level have remained relatively stable because of the growing ability for employers to increase the output of each employee, known as productivity, which allows businesses to avoid passing on higher worker costs to their customers.

Still, some parts of the Beige Book seemed to suggest that the shrinking pool of available workers might be on the verge of pushing wage growth faster than productivity can offset.

"Worker shortages persisted in every district, and practically every industry and occupation. Employment costs remained under pressure and appeared to intensify in the last two months," said the report.

The labor shortage could be seen even in typically low-skill occupations such as retailing. One report from San Francisco said that a retailer received only two applications for more than 20 job openings at a new store.

Low unemployment and rising wages have also helped to make U.S. consumers richer and more willing to spend, the report said.

Retailers around the country reported strong sales of home-related items such as appliances and furniture, as well as for sport-utility vehicles, indicating that they remain confident enough to spend, rather than save, their money. It also made them comfortable to freely borrow through credit cards and home equity loans, even as interest rates rose, the report said.

But higher rates did put a small dent in some housing markets, the report said, in one of the only signs of slowing economic activity around the country.

"New mortgage originations were down and refinancing activity remained very soft," said the report. But the majority of housing and construction activity that did slow were in the interior of the country, namely in the Federal Reserve districts around Cleveland, Chicago, St. Louis, and Kansas City. Housing markets in other areas of the country, including Dallas, Richmond, Minneapolis. The New York Fed indicated that activity in area housing markets was "frenzied."