Fed report shows U.S. economy slowing

The Fed report, known as “the Beige Book,” found that retail sales and residential real-estate activity have slowed. Labour shortages throughout the U.S. pushed wage and benefit costs higher. But the good news for interest rate watchers is that inflation has not ramped up in response to the wage pressures. Productivity gains and intense competition kept many companies from raising their own prices, says the Beige Book.

Higher interest rates have affected real estate demand as some low-income families found buying a home was not an option. Meanwhile, stock-market volatility encouraged caution among many Internet companies that had been formerly bent on making initial public offerings. That hurt business among support professionals — lawyers and accountants.

Overall, 11 of the central bank’s 12 regional districts noted “scattered signs of cooling,” reflecting a slowing economy. The survey is meant to guide Fed policymakers. They can consider the results before their Federal Open Market Committee meeting later this month. The FOMC will be determining whether to boost interest rates for the seventh time in the last year as part of an aggressive strategy to dampen an overheated American economy.

During the last few weeks several economic reports, including weaker-than-expected unemployment and retail sales reports, have suggested an econmic slowdown. As a result, many analysts have been steadily cutting their second-quarter economic growth estimates. They expect the Fed to keep rates steady in June.