The latest version of the Federal Reserve Board’s Beige Book economic report doesn’t include the impact of Hurricane Katrina as it’s based on information collected before August 29. Nevertheless it reveals an economy that was growing broadly amid light inflation before the Hurricane struck.

“Economic activity increased across the nation from mid-July through August, except in the Boston District, where activity was mixed,” the Fed reports. “The growth was widespread as retail sales, services, finance, construction, manufacturing, mining, energy, and tourism all expanded.”

The Fed reports that lending activity increased, and credit quality was stable. Vehicle sales were strong in all districts. And, conditions in the agricultural sector improved slightly, with late summer rains somewhat alleviating the effects of drought. It also notes that a few districts reported softening in residential real estate markets, but this is from still brisk levels of activity, and commercial real estate markets strengthened in most areas.

“Meanwhile, labour markets showed signs of tightening with modest wage increases,” it reports. “Except for energy, overall consumer price increases were modest. Most districts reported significant price increases in certain commodities and energy products, especially gasoline.”

It remains to be seen how Katrina impacts the U.S. economy. National Bank Financial notes that earlier today, the Bank of Canada maintained a positive outlook for Canada through 2006 by assuming only a modest impact on the economy from Katrina and higher energy prices. “At this point, the Bank is making the assumption that the recent spike in energy prices will be temporary,” NBF notes, saying it hopes the Bank of Canada is right.

However, it estimates that the share of gasoline spending shot up to 3.8% of disposable income in August, a level unseen in two decades. “In the past, such levels have been associated with a significant decline in auto sales,” it says. “Since autos account for about 20% of total Canadian exports, a shift in spending patterns in the U.S. is sure to reverberate on Canadian economic data.”

And so, it concludes, “There is a risk that our central bank could be forced to reassess its economic outlook sooner than expected.”