painted a brightening picture of the U.S. economy Wednesday in its so-called beige book report, a monthly survey of conditions nationwide.
Economic activity continued to expand from late November through early January, said the Fed, with most of the 12 Federal Reserve districts reporting only ``modest'' inflation pressures.
"Inflationary pressures remained largely in check in December and early January,'' the Fed survey said.
Consumer spending increased in most regions, getting off to a slow start in the beginning of the holiday season and then picking up after Christmas, according to the survey. Only one district, Cleveland, reported economic activity as "mixed."
The Kansas City, Philadelphia and San Francisco districts noted that luxury goods were especially popular over the holiday season, while the Atlanta, Chicago and Kansas City districts reported that electronics and jewelry had sold well. Gift cards sales were prevalent, while auto sales were mixed.
Tourist activity recorded a pickup in New York City and Florida theme parks.
Also, factories were generally busier.
"Looking ahead, manufacturers expected conditions to remain positive in coming months," the survey said. "Most districts reported that manufacturers intend to increase their capital spending in 2005."
The job market, however, remained uneven. Business contacts in Dallas, Kansas City, Minneapolis, New York and Richmond, Va., reported pickups in employment activity, but contacts in Boston, Chicago and San Francisco saw little change during the period.
The economy generated a net 2.23 million jobs in 2004, the first annual increase in three years.
Fed policymakers will use the report as a guideline for instituting monetary policy at their next Federal Open Markets Commitee meeting scheduled for Feb. 1-2. The FOMC is widely expected to raise the benchmark overnight bank lending rate by 25 basis points to 2.5%, consistent with the "measured" approached it has pledged to take in tightening the money supply to ward off inflation as the economy heats up.
The Fed raised interest rates five times by a quarter-point in 2004, after lowering its key rate to record levels in the wake of the 2001 recession to stimulate spending.