The latest survey is a tad better than the previous one released in mid-April. In that survey, all of the Fed's regions -- except for St. Louis -- reported "economic activity increased somewhat."
In the new survey, manufacturing picked up, retail sales grew, tourism improved and housing was helped by the now-expired tax credit for homebuyers. But commercial real estate is weak and labor market conditions improved only "slightly."
The picture painted by the survey is consistent with chairman Ben Bernanke's view -- shared with Congress on Wednesday -- that a modest economic recovery is unfolding. Bernanke predicted the recovery remains on track despite Europe's debt crisis, which has put Wall Street on edge in recent weeks, and stubbornly high unemployment, now at 9.7 percent.
However, economic growth won't be strong enough to bring speedy relief to millions of out-of-work Americans. Growth in the early stages of economic recoveries is usually much stronger. That's not happening this time because consumers and businesses haven't shown signs that they are inclined to go on spending sprees.
The survey will figure into deliberations when Bernanke and his colleagues meet next on June 22-23.
Many economists predict the Fed will keep interest rates at record lows to foster the recovery. A growing number believe the Fed will keep rates at super-low levels well into 2011 -- or possibly into 2012. That's because the recovery is fragile and still faces many risks. They include Europe's debt woes, a jittery stock market, tight unemployment, rising foreclosures, hard-to-get credit and many state and local governments wrestling with budget crises.
The survey also suggested inflation isn't a problem for the economy right now. That gives the Fed leeway to hold rates at record lows. Companies are loath to jack up prices given shoppers' caution, and employers aren't handing out hefty pay raises given lackluster economic conditions.
In the Atlanta region, which was affected by the Gulf oil spill and flooding in Tennessee, business conditions also logged modest improvements. However, business people expressed "considerable uncertainty" about the potential impact from both of those events.
The Fed survey is based on information collected from the Fed's 12 regional banks on or before May 28. The report gives the Fed a way to keep its pulse on local economic conditions.