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Thursday, 12 June 2008

US economy getting more sluggish: Fed

WASHINGTON - US economic conditions are getting more sluggish with consumers squeezed by high energy costs and bank lending tighter, the Federal Reserve said in its Beige Book report on Wednesday.

The Federal Reserve's latest survey of the US economy, suggested price pressures are weighing on businesses amid surging food and energy costs.

In the Beige Book survey of the 12 Fed regions 'economic activity remained generally weak' from late April through early May.

The latest report, to be used by the central bank at its monetary policy meeting later this month, continued a trend starting last October of each successive Beige Book showing a weaker economy than the one before.

Three of the 12 Fed banks used words such as softer, weaker or lower. Five reported little change in conditions. Four said they saw sluggish growth.

'Consumer spending slowed since the last report as incomes were pinched by rising energy and food prices,' the report said.

Retailers were beginning to report some concern about rising inventories and a few were laying off workers.

Auto sales were weak, although hybrids and fuel-efficient cars were selling better.

Manufacturing was 'generally soft' except for export demand. Housing- and auto-related manufacturers had the worst situation.

Across businesses, 'reports of higher input costs were widespread.'

Manufacturers 'noted some ability to pass along higher costs to consumers.' Wage pressures in most districts were 'moderate or limited' due to 'some loosening of labor market conditions.'

The regional Fed banks said housing was 'generally weak across the nation' with flat or declining home sales and high or rising inventories.

For banks across the country, 'reports of softening in the consumer segment persisted,' and commercial and industrial lending was 'mostly unchanged or declining,' the report said.

'All districts reporting on credit standards noted further tightening for consumer, residential and commercial loans,' the Beige Book said. -- AFP

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