WASHINGTON — The U.S. economy was growing at a moderate pace in the early fall, but with various parts of the country reporting signs of slowing activity in such key areas as retail sales and housing, the Federal Reserve said Wednesday.
In its latest survey of business conditions around the country, the Fed painted a picture of an economy that is slowing from the sizzling pace of earlier in the year, with inflation remaining under control.
The Fed said business activity had slowed significantly in five regions — Philadelphia, Atlanta, Cleveland, Richmond and Dallas — and all areas were describing growth as "moderate."
Things were better in the West Coast region that includes the Seattle area.
The forecast was for continued solid expansion in most industries, including manufacturing and services. Retailers reported moderate sales volumes and modest sales growth. Agricultural producers reported mixed conditions with weak demand and low prices for farmers and strong demand and firm prices for ranchers.
The new Fed survey, which will be used by central bank policymakers when they next meet Nov. 15 to set interest rates, joined a growing body of evidence that the economy has shifted to a lower gear.
Last week, the government said the overall economy, as measured by the gross domestic product, grew at a rate of just 2.7 percent in the July-September quarter, less than half the 5.6 percent pace of the spring.
"The economic slowdown is unfolding before our eyes," said Sung Won Sohn, chief economist at Wells Fargo & Co. in Minneapolis. "We have a slowing economy with very modest inflation."
Sohn and other analysts predicted that the Fed, which pushed up interest rates six times from June 1990 through May this year in an effort to prevent the economy from overheating, will leave rates alone at its next meeting and for many months to come.
Gordon Richards, economist at the National Association of Manufacturers, said it was significant that the Fed’s economic survey found little evidence that higher energy costs were beginning to push overall inflation higher.
"While the price of home heating oil and gasoline have increased, we haven’t seen those increases cascade into other sectors. That makes the Fed’s job much easier," Richards said.
The central bank survey said that despite the higher energy costs, strong competition was preventing manufacturing firms from passing on the higher costs to consumers.
Not all reports Wednesday showed weaker activity. The Commerce Department said construction spending actually increased by 2.4 percent in September, the biggest gain in 10 months, reflecting strength in home remodeling, office building and government projects.
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