Fed Survey Depicts a Battered Economy

The Federal Reserve painted a somber picture of weak retail sales, tough times in manufacturing and a lackluster job market in its latest survey of business conditions.

Many analysts said the report released Wednesday increased the chances the Fed would cut interest rates in November.

Compiled from information supplied by the Fed’s 12 regional banks, the survey depicted an economy that was battered in September and early October by a host of problems, from a plunging stock market to the West Coast dock shutdown.

The San Francisco district reported that economic activity grew modestly in September and early October, despite slowing sales of automobiles and smaller retail items and weak demand for manufactured items.

The agricultural sector was pinched by increased shipping costs following work stoppages at West Coast ports, but the effects elsewhere were limited.

Fed policymakers next meet Nov. 6, the day after voters go to the polls, to set interest rates. The Fed has left its benchmark overnight borrowing rate at a 40-year low of 1.75% since December, when it made the last of 11 rate reductions aimed at lifting the country out of recession.

The expectation of a possible Fed rate cut increased after the Fed’s meeting Sept. 24, when two Fed policymakers dissented from the majority decision to leave rates unchanged.

Analysts were struck by the bleak tone of the Fed survey, which is prepared eight times a year to give policymakers a look at business conditions around the country before their interest rate meetings.

The document is known as the “beige book” for the color of its cover.