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Economic Downturn Expands Countrywide
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"What this says to me is it's pretty bad out there," said David Wyss, chief economist of Standard & Poor's. "Everything we're getting in is looking more and more like the start of a recession."
The report strengthens the case for the Fed to cut interest rates further to stimulate the economy, which it is all but certain to do at a March 18 meting.
The most significant exceptions to that ugly picture were in sectors that have benefited from rising prices for commodities, especially food and energy. Phenomena that are a drain on most Americans' pocketbooks can be quite lucrative for those who drill for oil or grow corn. "High prices and a large 2007 crop has boosted farm income and spurred investment in farm equipment," reported the Dallas Fed.
Those same high prices, however, are fueling inflation, as reflected in the most recent indexes on consumer and wholesale prices.
"Contacts outside of the construction and retail industries generally reported that they were passing on these cost increases to their customers," the Chicago Fed said.
But while the economy is clearly in bad shape at the moment, it is less clear, from either the beige book or yesterday's data, whether this will be merely a period of sub par growth, or something more damaging.
"We are in a slow period of growth," said Coronado, the Barclays economist. "But what we didn't get from the report was any sense that things are contracting at a rapid pace. It's really hard to tell how deep and how persistent this weakness will be."
