US economic slump worsens

WASHINGTON (AFP) — The US economic slump worsened since early December, with a slowdown hitting a wide range of industries, the Federal Reserve said in its Beige Book report Wednesday.

The report, to be used by the Federal Open Market Committee at its next policy-setting meeting on January 27-28, indicated further deterioration in the economy one year after it slid into recession.

“Overall economic activity continued to weaken across almost all of the Federal Reserve districts since the previous reporting period,” the Beige Book said.

“Most districts noted reduced or low activity across a wide range of industries, although a few districts noted some exceptions in some sectors.”

The report said retail sales were “generally weak,” amid “deep discounting” during the holiday sales season.

The slump extended to vehicle sales, most manufacturing sectors, and in many cases tourism activity. Credit conditions remained difficult, according to the report.

In the real estate sector, where the crisis began, “markets continued to worsen in most districts,” with lower home sales, reduced prices and decreases in construction activity in much of the country.

Since the last Beige Book report on December 3, the central bank lowered its target federal funds rate from 1.0 percent, already at a historic low, to a range of zero to 0.25 percent. It also predicted “exceptionally low” rates to persist “for some time.”

The move was part of the Fed’s effort to get credit flowing and counter the massive economic slowdown.

Fed chairman Ben Bernanke pledged earlier this week to expand aggressive efforts to stem the financial crisis.

Bernanke said in a London speech the US central bank still has “powerful tools” at its disposal to tackle the economic crisis even if its main interest rate has been lowered to near zero, and suggested a recovery is possible by late 2009.

Wednesday’s Beige Book cited a “general weakening of labor market conditions” in most of the 12 districts, with wage pressures “largely contained,” and pay freezes or reductions in compensation by some firms.

Lending activity fell of remained weak and in many areas “credit conditions remained tight or tightened further,” the report said.

At least one regional bank, the Boston Fed, reported “that credit availability continues to be a major barrier to commercial real estate activity,” the Beige Book said.