Fed sees signs of improvement

NEW YORK (CNNMoney.com) -- The economy showed modest signs of life in recent weeks, the Federal Reserve said Wednesday in its latest summary of regional economic conditions.

Economic activity expanded "somewhat" in 11 of the central bank's 12 districts, according to the latest edition of the Fed's Beige Book, released Wednesday. St. Louis was the exception, reporting "softened" economic conditions.

"It's a gradual improvement, but certainly nothing that suggests the Fed is in any hurry to raise rates," said John Canally, an economist at LPL Financial. "There's just not an urgent tone in the report and improvements are very, very modest on all fronts."

"There's a recovery, but it doesn't seem that the Fed views it as self-sustaining," he added.

Improved conditions were led by increased manufacturing activity, which picked up in all districts except St. Louis since the last report, published in March.

Consumer spending also strengthened, spurred by increased sales in New York, Cleveland, Richmond and Kansas City.

Several districts reported consumers seemed "somewhat" more confident and businesses were "cautiously optimistic" about future sales, the Fed said.

The housing market was also a bright spot and many districts reported increased activity in the sector, though commercial real estate remained weak in most districts.

Increased hiring: While the employment picture remained dreary, the Fed said "some hiring activity was evident, particularly for temporary staff."

"That's something new, but they're just acknowledging that hiring has begun to pick up a little bit," said Canally. "The hiring of temporary workers has been rising since October because employers just can't afford to pay benefits to full-time workers."

In testimony before the Joint Economic Committee earlier Wednesday, Fed chairman Ben Bernanke warned that while private sector demand will be "sufficient" to bring about a moderate economic recovery in the next few months, more time is needed to recover job losses.

Fed action: While Wednesday's Beige Book showed signs of economic stabilization, Canally said that if the Fed was getting ready to raise interest rates, the language it used in the report would have been much stronger, and words such as "somewhat" wouldn't have been included.

"You would see them talking about a 'very strong' labor market and a 'briskly expanding' economy," he said. "That language would signal that they were raising rates."

The Fed's Beige Book, published 8 times a year, serves as an economic backdrop to the central bank's widely anticipated policy meeting, which takes place about two weeks later. The next meeting is scheduled for April 27-28.

At last month's policy meeting, the Fed held its key interest rate, the federal fund rate, between 0% and 0.25% and repeated that economic conditions are likely "to warrant exceptionally low levels of the federal funds rate for an extended period."