Fed Survey Finds More Softness in Economy

U.S. economic conditions were still sluggish in late October and early November as the economy felt the aftereffects of the Sept. 11 attacks, according to a Federal Reserve report released Wednesday.

“Reports from the Federal Reserve districts indicate that economic activity generally remained soft in October and the first half of November,” the Fed said in its “beige book” report, an anecdotal snapshot of the economy based on reports from the Fed’s 12 regional banks.

The Fed added that the slowdown deepened in most regions, a trend that outweighed signs of recovery in a few areas.

The Fed said consumer spending was mixed, with auto sales rising to “exceptional levels,” but purchases of other goods were “spotty.”

“Retailers’ outlook for spending during the upcoming holiday season was also mixed,” the Fed said.

The Fed said in most areas of the country luxury sales suffered but discount retailers saw a jump in demand.

Car sales were expected to weaken from their lofty levels, after they were helped greatly by interest-free loans offered by auto makers.

“Looking ahead, automobile dealers expressed concern that sales in coming months would fall as incentives ended,” the Fed said.

The beige book report, for use by Fed policymakers at their Dec. 11 meeting, was based on information gathered before Nov. 19.

The Fed said job markets nationwide weakened further.

“Layoffs and downsizings contributed to a greater supply of available workers and wages were steady to lower,” it said.

As an example of the softness, the report mentioned an employment agency whose clients have been seeking cuts in billing rates for temporary workers.

The Fed has cut short-term interest rates 10 times this year in an effort to boost the economy.

Earlier this week, the National Bureau of Economic Research said the economy fell into a recession in March.

Despite the lower interest rates, the Fed said banks were issuing few loans.

“Several districts reported tighter credit standards for bank lending and increases in loan delinquencies,” the report said.

The Fed’s report showed little to worry about on the inflation side as prices were described as “stable.”

The central bank said prices for cars, gasoline and computers were falling while insurance and health-care costs headed higher.