Fed's Beige Book reflects slowing economy

Retail sales in January and early February were down from 2007, according to the report. Nearly two-thirds of surveyed retailers said sales decreased, while 22 percent saw increases, and two-thirds reported that sales were below expectations.

Outer wear, food and other essentials were strong sellers, but gift items and large-ticket products moved more slowly.

The future may be less bleak for retailers – about 44 percent of respondents expect sales in March and April to increase over 2007 levels, according to the report.

Manufacturing activity, meanwhile, appeared to increase in early 2008, but respondents expressed concern about future effects of the housing market slowdown.

Home sales in the eighth district followed the national trend and dipped between 12 percent and 22 percent in major cities. Residential construction also declined, as 2007 single-family housing permit numbers fell in nearly all metro areas compared to 2006. Commercial real estate market conditions were generally positive, with declines in some industrial and office vacancy rates.

Credit standards for commercial loans were tightened in some areas and demand for them was weaker. Credit standards for consumer loans were unchanged and demand for them was moderately less.

Overall, field crops in the district grew in value by 36 percent in 2007, with Missouri seeing an increase of at least 30 percent. The gain reflected higher prices for major crops, such as corn, soybeans, winter wheat and sorghum.

Meanwhile, the Federal Reserve’s open market committee on March 17 sliced three-quarters of a percentage point off of the federal funds rate.

The cut – the sixth in six months – brings the rate to 2.25 percent.

The Fed pointed to weakening economic activity for its decision, with factors at play including slow growth in consumer spending, softening labor markets, stress on financial markets, tightening of credit conditions and further declines in the housing market, according to the Fed’s statement.[[In-content Ad]]