Fed Says Slow Growth to Persist in Economy

The nation’s economy continued to grow slowly as it entered the new year and is expected to continue that expansion throughout 1990, the Federal Reserve Board said today.

“Economy activity is expanding slowly in most of the nation, with conditions somewhat stronger in the West than in the East,” the central bank said in a survey of its 12 districts completed Jan. 13.

Retail sales varied during the Christmas shopping period, ranging from “disappointing” in Boston to modest in Philadelphia and Atlanta and relatively strong in Chicago, Minneapolis and San Francisco.

But the report added, “Widespread discounting generally reduced store profits.”

“Manufacturing activity is generally sluggish, with production declines in some industries (autos, in particular) offsetting gains in others (such as commercial aircraft and oil field equipment),” the survey found.

“Several districts reported that the steel and computer industries, among others, may be ‘bottoming out.’ ”

The survey by the Fed’s 12 district banks was conducted in preparation for the Feb. 6-7 meeting of the Federal Open Market Committee, the central bank’s monetary policy-setting arm. It was compiled in what is known as the “Beige Book” by the Federal Reserve Bank of Boston.

The slow economy has resulted from the Fed’s battle to drive interest rates higher as a way of dampening demand and cooling off inflationary pressures.

The Fed switched course last June and has permitted short-term rates to drop gradually in an effort to keep the slowing economy from stopping altogether and falling into a recession.

But the central bank has not acted since then and just last week, the White House broke its usual no-comment stance on Fed activities and said “lower interest rates are justified.”

As is usual, today’s report by the Fed carried no recommendations, but said, “The outlook is for slow growth in all regions in 1990; some respondents expect improvement late in the year.”

In other areas, the report’s summary said, “Unseasonably cold weather dampened construction activity in some areas, but real estate markets generally held steady. Cold or dry weather also adversely affected citrus, vegetable and winter wheat crops. Other agricultural and resource-related sectors did moderately well.”