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Federal Reserve 'beige book' signals widespread slowdown of economic growth

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By Neil Irwin
Washington Post Staff Writer
Thursday, September 9, 2010; 2:34 AM

The U.S. economy continued growing this summer but "with widespread signs of deceleration," according to a new report on business conditions around the country.

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The Federal Reserve's "beige book," an eight-times-a-year compilation of anecdotal information from companies in the 12 Fed districts, offers a portrait of an uncertain economic moment in which growth has slowed in much of the United States.

"Economic growth at a modest pace was the most common characterization of overall conditions," said the report, released Wednesday afternoon and based on interviews with businesspeople from mid-July through the end of August. However, five of the regional Fed banks east of the Mississippi River "highlighted mixed conditions or deceleration in overall economic activity."

Also Wednesday, new evidence pointed to American consumers continuing to reduce their indebtedness, though at a slower pace than forecast. Consumer credit declined by $3.6 billion in July, the Fed said, compared with the $4.7 billion decline analysts had forecast.

The drop was steepest in revolving debt, suggesting that people were paying down their credit card bills. The decline in debt is helping Americans adjust their finances to a more sustainable position, but using money to reduce debts also is a drain on economic activity in the near term.

The Labor Department on Wednesday released detailed information on the job market in July. The number of open positions rose by 178,000 that month, reflecting a slow improvement in conditions for people looking for work.

But the Job Openings and Labor Turnover survey also revised down its estimate of the number of job openings in June.

The anecdotal information contained in the beige book is consistent with a slew of economic reports showing that the burst of growth in late 2009 and early 2010 has not persisted through the summer, as the impact of businesses rebuilding their inventories and fiscal stimulus fades.

Overall economic activity, as measured by gross domestic product, rose at a 1.6 percent annual rate in the April-through-June quarter, too slow to push down the unemployment rate. Forecasts for the third quarter, which ends this month, are not much better.

According to the beige book, consumer spending seems to be rising slowly.

Most Fed districts reported that retail sales excluding automobiles rose, but the Atlanta Fed "reported a decline in the level of sales, and Richmond noted that sales 'sputtered' in August, while New York and Dallas reported that growth in retail sales slowed."

Spending on big-ticket items such as consumer electronics was weak, according to Fed banks in Philadelphia, Richmond and Dallas, and most districts reported that auto sales were "largely stable or up."

Manufacturing activity, meanwhile, "expanded further on balance, although the pace of growth appeared to be slower than earlier in the year."

Federal Reserve officials use the report to help decide the course of monetary policy, and it is released in advance of their policymaking meetings.

The Federal Open Market Committee is scheduled to meet Sept. 21. Officials are expected to leave their interest rate target near zero and will probably weigh whether to undertake any new unconventional efforts to prop up growth.


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