Fed: Slower growth, rising prices slam economy

Published: Wednesday, July 23, 2008 12:21 p.m. MDT
 |  E-MAIL | PRINT | FONT + - 
WASHINGTON — The country slogged through slower economic growth and rising prices during the summer, packing a double whammy to people and businesses alike.

The Fed's new snapshot of business conditions, released Wednesday, also underscored the challenges confronting Federal Reserve Chairman Ben Bernanke and his colleagues as they try to get the economy back on track.

For now, many economists predict the Fed will probably leave a key interest rate alone when it meets next on Aug. 5 — given all the economic crosscurrents. Boosting rates to fend off inflation would hurt the fragile economy and the already crippled housing market. On the other hand, the Fed isn't inclined to lower rates because that would aggravate inflation.

Growth and inflation barometers turned worse in the summer, according to the Fed report. Some worry that the country may be headed for a bout of stagflation, that toxic combination of stagnant growth and stubborn inflation last seen in the 1970s.

Bernanke has said, however, that he doesn't believe the economy will suffer from stagflation.

Information from the Fed's 12 regional banks around the country suggested that "the pace of economic activity slowed somewhat since the last report" issued in June, the Fed report said.

Story continues below

Consumer spending — the economy's lifeblood — was reported as "sluggish or slowing" in nearly all the 12 Fed regions, although the government's tax rebate checks spurred sales for some items, especially electronics. Sales at many other stores, particularly for housing-related goods, were typically characterized as "weak or falling," however.

Looking ahead, "the outlook for retail activity was also generally downbeat," the Fed report said. Sales expectations were described as "grim" among retailers in the Dallas Fed region and "subdued" in the Atlanta region.

Auto sales, meanwhile, were characterized as "almost uniformly weak" across all Fed regions. Sales were especially poor for gas-guzzling SUVs, trucks and some minivans.

On the manufacturing front, activity declined in many Fed regions. Production of housing-related goods, such as construction equipment, wood products, home furnishings and heating and cooling systems were particularly hard hit. On the positive side, though, overseas demand for U.S. exports remained "generally high."

The drooping value of the U.S. dollar, which makes U.S.-made goods and services cheaper and more attractive to foreign buyers, has helped to boost export growth. That export growth has been a key force keeping the economy afloat.

The Dallas region noted strong overseas sales of high-tech products. The Fed regions of Cleveland, Richmond, Chicago and Kansas City all reported continued high demand for exports.

Comments

You can be the first to comment on this story.

previousnext

Latest comments

I suggest that he get counselling.

This article was posted a long time ago. If this article was about BYU,...

The partisan hacks should realize that she is as qualified as any other...

In answer to the question asked by the headline, the answer is YES!

Kill hate-crimes bill

To 9:37, What kind of convoluted thinking do you use when you want special...

It seems almost 3/4 of all player contracts expire next year. Should be...

Mall owner seeks to retain zoning

It will be years before they can build this development. Turn it into a park...

The Sad truth is many people do not know how to properly display the flag,...

I thought Al Gore invented the Internet?

I was at SOF for the first time ever, reluctantly, but we went to see the...

Advertisements