The Federal Reserve said the U.S. economy expanded modestly in January through mid-February as hiring picked up a bit across several districts.

The U.S. central bank's Beige Book released on Wednesday had much the same cautiously upbeat tone as the previous report, and pointed to some improvement even in the battered housing sector.

Residential real estate market conditions improved somewhat in most districts, the report, an anecdotal report on business activity, said. Hiring increased slightly across several districts.

Manufacturing appeared to be a bright spot, with many of the Fed's 12 regional districts reporting rises in new orders, shipments or production, and several pointing to more robust investment spending.

In testimony on Wednesday, Fed Chairman Ben Bernanke expressed concern that the sharp recent drop in the unemployment rate may not be sustained. The jobless rate has fallen to 8.3 percent from around 9 percent last summer.

The decline in the unemployment rate over the past year has been somewhat more rapid than might have been expected, given that the economy appears to have been growing during that time frame at or below its longer-term trend, Bernanke told the U.S. House of Representatives Financial Services Committee.

U.S. economic growth for the fourth quarter was revised up to 3 percent on Wednesday, but forecasters see the first quarter's rate coming in closer to 2 percent.

Fed officials have been debating another possible round of monetary stimulus through bond purchases, but some improvement in the outlook in recent weeks has dampened the prospect for such action.

The Beige Book report portrayed inflation as subdued, but it warned that some businesses were expecting to pass higher input costs - presumably linked to the recent spike in energy costs - along to consumers.

(Reporting By Pedro da Costa; Editing by Neil Stempleman)

Ben Bernanke Federal reserve