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Fed Says US Economy Remains Sluggish
US economic activity remained sluggish even before last week's terror attacks as consumer spending was flat to down and manufacturing activity remained week, the Federal Reserve reported Wednesday.
"Reports from Federal Reserve Districts generally indicated that overall economic activity remained sluggish in August and early September, with several suggesting that activity slowed further," the Fed said in a new survey of the economy.
The report, known as the Beige Book for the color of its cover, was based on data collected before September 10, a day before the terror attacks on New York and Washington, and will be used when the Fed meets on October 2 to decide interest rates.
Consumer spending was "flat to down" overall through the period, with federal income tax rebates having "only a limited effect on spending in August," the report said.
The Bush government will have returned 40 billion dollars in tax rebates to taxpayers through the third quarter, which most analysts said before last week's attacks would have a significant impact on consumer spending.
"Manufacturing activity remained weak in nearly all regions, and the softness appeared to be broad based," the Fed said. Demand for commercial space softened further in most districts, it added.
But residential real estate markets were "brisk, strong or steady" in most districts, buoyed in large part by low mortgage rates.
Seeking to stave off recession, the Fed has cut interest rates eight times this year, totaling 3.5 percentage points, driving down the borrowing costs to the lowest level in more than seven years.
As the terror attacks have raised the risk that the U.S. economy could slip into a full blown recession, economists expect the Fed to further cut interest rates in a bid to stimulate economic growth.
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