The United States struggled with slow economic growth and high prices that are limiting consumer and business spending, the Federal Reserve (Fed) reported Wednesday. The Fed's Beige Book report, named for the color of its cover, underscored the damage the housing, credit, and financial crises are inflicting on the economy and said the problems are likely to persist into next year. Moving into the autumn, U.S. economic activity continued to be slow, the central bank said. Businesses described the climate as “weak.” Consumers, whose spending accounts for two-thirds of total economic activity, “concentrated on necessary items and retrenchment in discretionary spending,” the report said. Many businesses and consumers were hurt by higher prices for energy, food, and other items, though oil prices have fallen from their mid-July record highs. While businesses welcomed falling gasoline and diesel costs, they told the Fed that prices still remain elevated. “Business contacts in a number of [Fed] districts indicated that they had increased selling prices in response to the high costs” of certain commodities, the report said. The Fed said manufacturing activity was “weak or declining” in most Fed districts. Demand for housing-related goods and construction materials continued to fall. While some manufacturers said exports were helping offset weak U.S. sales, they also noted “some recent slowing in growth” in exports, the report said. Fed Chairman Ben Bernanke and his policy-making colleagues are widely expected to leave a key interest rate unchanged at 2 percent when they meet next on September 16, and will probably keep the rate unchanged for the rest of the year. Given the fragile health of the economy, the Fed is not in a hurry to raise interest rates to fight increasing inflation. Many analysts believe the economy is likely to hit another dangerous period later this year as consumers and businesses further reduce their spending.
