The US economy continued to grow in July and early August according to the country’s Federal Reserve, however it also cautioned that manufacturing activity was softening in many areas of the country.

In its Beige Book report, the US central bank said retail activity - including auto sales - had picked up since the last report.

The survey of anecdotal information on business activity collected from contacts nationwide was prepared for use by reserve officials at their upcoming policy meeting on 12-13 September.

There policymakers will debate whether further central bank bond purchases are warranted to spark a stronger recovery.

US growth figures published earlier today were in line with economists' expectations but are felt to be insufficient to rule out the need for more quantitative easing from the Fed.

GDP expanded at a 1.7% annual rate, the US Commerce Department said as stronger export growth offset a drop in restocking by businesses wary of sluggish domestic demand.

That was up from last month's 1.5% estimate and in line with economists' expectations.

The economy grew at a pace of 2% in the period between January and March.

The report also showed that after-tax corporate profits unexpectedly rose at 1.1% rate after sinking 8.6% in the first quarter.

Growth remains well below the 2%-2.5% rate required every quarter to hold the unemployment rate steady.

That could compel policymakers at the US central bank to offer additional stimulus at their meeting on September 12-13.

Speculation the Fed would loosen policy further had been dampened by a pick-up in job growth and a rebound in retail sales in July, but other data on business spending and inflation supported more action.

Chairman Ben Bernanke could offer more clarity in the near-term outlook for monetary policy when he gives a speech at the Kansas City Fed's high-profile gathering in Jackson Hole, Wyoming, at the end of the week.

The jobless rate rose to 8.3% in July from 8.2% the prior month. The weak economy could be a stumbling block to President Barack Obama's quest for a second-term in office in November.