Beige Book: Economy Growing at "Modest to Moderate" Pace

Hiring, spending all increasing at a moderate pace; wages holding steady.

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Rising consumer spending and expansion in manufacturing helped grow the economy slightly in July and August, according to the Federal Reserve.

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The Federal Reserve reported Wednesday the economy grew at a "modest to moderate" pace in July and August, with its "beige book" anecdotal summary finding expansion in manufacturing and rising consumer spending in most of the country.

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The report comes two days ahead of the Labor Department's monthly jobs report and after a recent upgrade to the economy's second quarter growth rate from the Commerce Department. All in all, the account paints a picture of an economy that is ambling along at a medium pace.

Stocks held their ground after the report's release, with the Dow Jones Industrial Average up about 100 points in early afternoon trading Wednesday.

The combination of reports sets the stage for a widely expected drawdown of the Fed's so-called QE3 monetary stimulus program, in which the central bank has been acquiring $85 billion in bonds and other investments to spur the economy. This "tapering," which has been telegraphed for months by the Fed and its chairman Ben Bernanke, has unnerved markets around the world but with other recent reports of an improvement in European economies, the hope among traders is that investors will take the withdrawal of easy money in stride.

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"This has been a slow recovery compared to most others in post-WWII history, but the economy is gradually improving," Kathy Jones, vice president and fixed income strategist at the Schwab Center for Financial Research, wrote in a recent research report. "Assuming moderate growth longer term and a withdrawal of the Fed's extraordinary policies, interest rates are likely to move higher."

The Fed also detailed minimal inflationary pressures, noting "upward price pressures remained subdued, and prices increased slightly during the reported period." Meanwhile, "wages continued to be modest overall."

On the hiring front, the Fed said most employers either kept payrolls steady or engaged in modest increases in their workforces.

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