Economy Still in Doldrums, Federal Reserve Report Says

The U.S. economy showed some glimmers of improvement in April and May, but business and consumer activity remained sluggish and the end of major hostilities in Iraq provided only a mild boost, the Federal Reserve said Wednesday.

“The unwinding of war-related concerns appears to have provided some lift to business and consumer confidence, but most reports suggested that the effect has not been dramatic,” the central bank said in its “beige book,” which includes statistical and anecdotal information gathered by the agency’s 12 district banks.

The April-May report said no district had reported any deterioration in conditions since the last survey and there were “some signs of increased economic activity” in the Dallas, Kansas City, New York and Minneapolis districts.

However, the majority of the districts reported mixed, sluggish and subdued growth, with consumer spending remaining “lackluster overall” and most areas continuing to report “weakness in labor markets and some downward pressure on wages.”

The Federal Open Market Committee will take the beige book report, so named because of the color of its cover, into consideration when it meets this month to review interest rates and other issues.

Many economists and financial analysts expect the agency to cut interest rates once again to strengthen a so-far anemic and spotty economic recovery.

On the West Coast, the Federal Reserve Bank of San Francisco said that despite “scattered reports of modest improvement,” much of the region reported “continued sluggish economic growth.”

Most West Coast retailers said postwar business had not changed much and that prices remained stable. The San Francisco bank also found little evidence that severe acute respiratory syndrome had much economic effect outside the travel and tourism sectors.

One of the few bright spots was residential real estate, with lenders reporting strong demand for new home loans as well as mortgage refinancings. Homes sales and construction activity remained vibrant.

There also was good news from the producers of advanced information technology products, which reported strong demand and plans for expansion.

In general, though, West Coast manufacturers “faced weak demand and substantial excess capacity in general,” the San Francisco bank said.