The U.S. Federal Reserve said Wednesday economic activity around the country remained subdued in January and February as concerns about a possible war in Iraq slowed spending by consumers and businesses.

The Fed’s latest survey of business conditions, compiled from information received from its 12 regional banks, showed that most areas of the country had seen little pickup in activity since the last survey completed in early January. Only a few districts reported any notable changes from the last Beige Book. Notably, New York said that its regional economy had “generally weakened.”

Consumer spending remained weak with a few districts noting a little improvement and others indicating a slight deterioration. Business spending was very soft, with little change in capital spending or hiring plans.

Nearly all districts indicated that real estate and construction activities were mixed, with strength on the residential side and weakness on the nonresidential side. Most districts still described manufacturing activity as weak or lackluster, although half of the reports noted at least some degree of improvement. Refinancing activity continued to drive growth in household loans, while business loan demand remained weak.

Contacts in most districts expressed concern over rising energy and insurance costs, but noted that businesses had difficulty passing along much, if any, of the cost increases to their customers. The agricultural sector continued to be affected by poor weather in many districts. Mining and energy extraction activity picked up, but energy production was limited by supply problems and some shortages of skilled labour.