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Fed survey shows decline in economy

October 16, 2008|From Bloomberg News

The economy deteriorated throughout the nation last month and pessimism spread, the Federal Reserve said in its regional economic survey Wednesday.

"Economic activity weakened in September across all 12 Federal Reserve districts," the Fed said in its "beige book" report, published two weeks before officials meet to set interest rates. "Consumer spending decreased in most districts, with declines reported in retailing, auto sales and tourism."

The San Francisco bank noted sluggish retail sales and demand for services.

Manufacturing also slowed, but agricultural production grew.

With the economy weakening under the effect of the yearlong financial crisis and housing recession, and with consumer prices easing, most investors anticipate the Fed will lower interest rates by a quarter of a point Oct. 29, following up on an emergency rate cut a week ago.

The Fed reported declines in most districts for manufacturing, and "nearly all" districts reported a reduction in business for service industries. Several regional banks reported that "their contacts had become more pessimistic about the economic outlook."

Housing and construction "weakened or remained low" throughout the country, and demand for housing-related goods, building materials and construction equipment remained at "low levels" in all regions, the Fed said.

"Credit conditions were characterized as being tight across the 12 districts," with several reporting reduced credit availability for businesses.

The report was prepared by the Chicago Fed, based on information collected before Oct. 6.

The report noted that across most districts, "inflationary pressures moderated a bit in September."

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