From Deseret News archives:
Fed: Slower growth, rising prices slam economy
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.
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.
Comments
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