Fed's Beige Book cites slow growth, higher price pressures

Wed Jul 23, 2:19 PM ET

WASHINGTON (AFP) - US economic activity appears to have slowed to a crawl in the past weeks even as price pressures intensified, the Federal Reserve said in its Beige Book report Wednesday.

The Fed's latest survey of the US economy, to be used by its policymakers for their August 5 meeting, painted a grim picture of soft activity along with higher inflation.

"Reports from the 12 Federal Reserve districts suggested that the pace of economic activity slowed somewhat since the last report," the Beige Book said.

It said the five eastern districts "noted a weakening or softening in their overall economies" while the Midwest regions covered by the Chicago and Kansas City district banks "noted a moderation in growth."

Two other districts, St. Louis in the Midwest and San Francisco, "reported little or no growth," while the Dallas Fed "described growth as steady and moderate."

The inflation picture was equally downbeat.

"All districts characterized overall price pressures as elevated or increasing," the report said.

"Input prices continued to rise, particularly for fuel, other petroleum-based materials, metals, food and chemicals."

Retail inflation "varied across the country" while wage pressures "were generally limited in most districts," mainly because of weak labor markets, according to the report.

The Beige Book said consumer spending was "mixed, weak, or slowing in nearly all districts since the last report," even though tax-rebate checks boosted sales for some items. Restaurant sales were slow in some areas and the outlook for retail activity was "generally downbeat."

Auto sales "were almost uniformly weak across districts" with especially poor sales for large vehicles such as trucks and sport utility vehicles.

Tourist activity was mixed amid some hotel cancellations and "more residents vacationing close to home due to high gasoline prices." But New York reported strong tourism activity for Broadway shows and at Manhattan hotels.

Manufacturing declined or "remained weak" in most areas, the report said, with few pockets of strength in sectors related to exports or hybrid cars.

The troubled real estate market showed few signs of life, according to the Fed, with weak sales and declining prices in most of the country. Potential home buyers have "difficulties obtaining mortgage financing" in some areas around New York and Chicago and all districts reported single-family home construction activity continued to decline.

The banking sector held back on loans in many regions due to housing and credit woes, especially for home mortgages.

"Most districts reported a further tightening of credit standards, especially for residential real estate and construction loans," the Beige Book said.