Fed Sees New Signs of Slower Growth

The economy ambled steadily into the fall but with fresh signs of a slowdown as consumers watched spending more warily and businesses had trouble passing along higher costs, according to a government report released Wednesday.

The Federal Reserve’s latest “beige book” survey of America’s business climate found that “economic activity continued to expand” but five Fed districts “indicated deceleration, while the remaining seven reported little change in the pace of growth.”

People held back, especially on spending for automobiles and household items.

The survey is based on information supplied by 12 regional Federal Reserve banks and collected before Aug. 28. That snapshot will figure into discussions at the central bank’s next meeting Sept. 20.

The Fed’s survey indicated that even though businesses were faced with high prices for energy and other raw materials, these higher costs were not necessarily finding their way to shoppers in the form of higher retail prices.

High energy prices are believed to have “crimped consumer demand in general” in some Fed districts, the Fed report said. Overall, consumer spending increased “modestly in most districts though a few districts reported flat to declining sales,” the report said.

The Fed described the market for labor as either “steady” or “expanding moderately” in many Fed districts with scattered reports of worker shortages. For instance, the Cleveland district indicated a shortage of truck drivers. Atlanta noted ongoing shortages of construction and hospitality workers along the Gulf Coast, where Hurricane Katrina struck last year. Some companies reported pressure to boost workers’ wages, although these reports were mostly related to workers with special skills.

In other areas, the Fed observed fresh signs of cooling in the once-sizzling housing market. Relatively flat or declining home prices were noted in the New York, Richmond, Va., and Kansas City, Mo., Fed districts, the report said.

In the San Francisco district, which includes California, the report said “wage and price inflation were limited with reports indicating substantial variation across sectors in the degree of wage and price pressures.”

Residential construction activity, sales and price appreciation in the San Francisco district continued to decelerate in most areas, and commercial real estate activity expanded further, the survey found.