Money Woes Won't Let Up, Consumers Jittery

The Fed Treats Fragile Economy With Kid Gloves As Inflation, Joblessness Creep Up

(AP)  The nation struggled with slow economic growth and still-high prices that are weighing on consumers and businesses alike as the race for the White House kicks into high gear.

The Federal Reserve's new snapshot of business conditions, released Wednesday, underscored the toll the housing, credit and financial debacles are having on the economy and the challenges likely to be faced by the next president. Problems are expected to persist into next year.

Fed Chairman Ben Bernanke and his colleagues are all but certain to leave a key interest rate alone at 2 percent when they meet next on Sept. 16 and probably through the rest of this year.

Given the fragile state of the economy, the Fed isn't in a hurry to boost rates to fend off creeping inflation. A growing number of analysts believe the economy is likely to hit another dangerous rough patch later this year as consumers and businesses curtail their spending even more.

Heading into the fall, economic activity continued to be slow, the Fed said. Businesses described the climate as "weak" or "soft" or "subdued."

Consumers, the lifeblood of the economy, showed caution. Shoppers "concentrated on necessary items and retrenchment in discretionary spending," the Fed observed.

The Fed regions of Chicago, Dallas and San Francisco, for instance, reported noticeable declines in spending on clothing, electronics and jewelry. Sales of furniture and household appliances, meanwhile, were weak in most parts of the country - victims of the housing slump.

On the inflation front, many businesses and consumers felt the sting of high prices for food, energy and other things. The recent drop in oil prices from a record-high of $147.27 in mid-July does give the Fed more leeway to keep its key rate steady. Oil prices are now hovering above $108 a barrel.

And, while businesses welcomed this drop, they told the Fed that prices still remain elevated. "Business contacts in a number of (Fed) districts indicated that they had increased selling prices in response to the high costs" for certain commodities.

Workers' wage gains - characterized as "modest" - aren't raising inflation worries. Wary employers have cut jobs every month so far this year and aren't inclined to be overly generous in their compensation to workers amid "a general pullback in hiring," the Fed said.

The nation's unemployment rate jumped in July to a four-year high of 5.7 percent. Many economists predict the jobless rate will climb a notch higher - to 5.8 percent - when the government releases the August employment figures on Friday. More job losses also are expected.

The Fed's report also said that manufacturing activity was "weak or declining" in most Fed regions. Demand for housing-related goods and construction materials continued to wane. Although some manufacturers said exports were helping bolster their activity, they also noted "some recent slowing in growth from this source," the Fed said.

Export growth figured prominently in the second-quarter's rebound. Economic growth clocked in at a 3.3 percent pace, the government reported last week. The rebound isn't expected to last, however.

Economic slowdowns overseas could make exports tail off just as Americans are hunkering down after the bracing impact of rebate checks wanes, plunging the country into another rut later this year.

On the housing front, conditions "weakened or remained soft" in most Fed regions. Banks, meanwhile, reported weakening demand for mortgages and consumer loans.

The Fed report is based on information supplied by the Fed's 12 regional banks. The information was collected before Aug. 25.

In a separate report out Wednesday, the Commerce Department said orders placed with U.S. factories rose by 1.3 percent in July as demand for commercial aircraft, heavy machinery and iron and steel all posted gains.

Factories have been helped by the drooping value of the dollar, which makes U.S.-made goods cheaper and more attractive to foreign buyers. That also has helped to boost overall export growth.

[tksk53]

If our current President didn''t put us in trillons of dollars in the hole, the USA would still be the riches country in the world. Now Cnina and a host of other countries own us
THANKS BUSH AND HIS CRONIES FOR THIS
AND WE KEEP SENDING MONEY TO A COUNTRY WE STARTED A WAR WITH THAT SHOULD NEVER HAVE HAPPENED, AND THEY NOW HAVE 80 BILLION DOLLARS OF OIL MONEY THEY ARE HOARDING
GOOD THING WE HAVE A CHANGE COMING SOON
TKTK53

[whitemale08]

...and now some beauty queen party hack wants to continue the very same failed economic policies of the last 8 years!!!

Good grief!

[mytoosense]

Ah, the two aspects of the masses the GOP gives a crapp about, the economy (are the sheep spending enough?) and the winds of voter sentiment every four years.

[wl7bzh]

How many times do we have to endure another Rethuglican "experiment" in trickle-down economics, before people realize that the thugs in charge of the banks and WS brokerages are no Einsteins?

Posted by imprisonrove at 08:33 AM : Sep 04, 2008

Trickle-down economics? Is that kinda like the sensation one experiences when they realize that their Depends are leaking?

[bullwinkle66]

Well 10 pounds of potatoes was a dollar when Bush took office. Now they''re 5 dollars and a third of them are rotten. The list of severe price increases are too numerous to display here. The republicans always want people to stand on your own 2 feet and then spend their entire careers making that more and more impossible. We are animals with a survival instinct. We''re headstrong and somehow are able to make due with less and less each year. But we''re not stupid and we know we''re the economic cannon fodder without a voice. The poor is this country have to endure the biggest burden in all aspects of this society. No health care. High credit costs and government created penalties by the score. Your only Crime. LOW WAGES. And the only vacation you''ll get is a ride in the hearse. You look at those pathetic idiots at the republican convention that gave us 8 years of George Bush. People that are so stupid they believed him and all those lies. McCain he''s gotta lie too, to get the suckers to vote for him. Because of the last 8 years Obama should have a 10-20 point lead across the board. But he doesn''t..

[bullwinkle66]

Because of religious zealots who can''t come to grip with reality in any and all aspects of their lives. Abortion is here to stay. God is not on the side of Americans and Bush/Cheney/McCain isn''t either. The economy is headed way south shortly. The republicans are trying to make it to the election, but it''s not easy being sleezy. Then after the election the real wake up call comes. Hope jail food has gotten better, but the wood on the street, it hasn''t.