Economy's pace loses its spring: Fed survey says weak spending cooled growth
WASHINGTON -- The Federal Reserve's latest survey of regional economic conditions found "modest growth," but at a slower pace than in recent months because of weak consumer spending.</br></br>For retailers, it's beginning to look a lot like a sluggish Christmas, the Fed concluded in a summary of reports collected by the 12 regional Federal Reserve banks in September and October. Sales of fall and back-to-school goods were almost uniformly "disappointing or below expectations," the Fed said.</br></br>Manufacturing picked up in some districts, however. The Philadelphia Fed, for example, found strong demand for electrical machinery, metals and glass products. "It's not a boom, mind you," a steel production representative cautioned the Chicago Fed. Indeed, purchase orders mostly softened in the Dallas and Cleveland districts.</br></br>In keeping with what analysts call a slow but steadily growing economy, construction improved slightly, and there was a "firming" in commercial and industrial leasing activity. Also, inflation remains under control. Wage gains were moderate, despite mostly tight labor markets, and reports of rapidly rising materials costs fell off substantially, the report said.</br></br>But the reluctance of consumers to spend is keeping the slow-rolling economy from shedding its training wheels. In the Boston district, where sales in September and October fell by as much as 20% from the year-earlier period, widespread discounting is "eating away at gross margins and profits," the Boston Fed said. Without any intriguing new fashion offerings, apparel sales continue to fare the worst. But the New York Fed said sales of big-ticket items such as furniture and home electronics also softened.