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Fed: No Reason To Dance In Aisles

Alan Greenspan economy stock market
CBS/AP
The sluggish U.S. economy is showing a few signs of life, but the post-Iraqi war bounce hasn't been dramatic, the Federal Reserve reported Wednesday in its Beige Book survey of current economic conditions.

Perhaps the brightest news in another gloomy report from the Fed was the fact that none of the 12 Fed districts said conditions were getting worse.

Four of the 12 banks said conditions were improving while six said they saw no improvement. Two said the economy was "mixed."

"The unwinding of war-related concerns appears to have provided some lift to business and consumer confidence, but most reports suggested that the effect has not been dramatic," the Beige Book concluded.

Overall, consumer spending was lackluster, the report said. Manufacturing was mixed, with worsening conditions in some regions and sectors offsetting improvements elsewhere.

Bankers were busy refinancing home loans. Credit conditions were not worsening. Energy producers strengthened. Other service sectors were described as sluggish.

The labor market was still weak. Neither inflationary nor deflationary pressures were widespread.

The Beige Book was produced by the professional staff at the Federal Reserve Bank of Dallas based on thousands of business contacts across the country through June 2.

The views in the report do not reflect those of the voting members of the Federal Open Market Committee, which will meet in two weeks to consider whether another rate hike is justified to boost the economy and forestall deflation.

Financial markets are increasingly pricing in a rate cut. Yields on six-month bills fell below 1 percent on Tuesday in anticipation of lower short-term rates. Long-term notes have also rallied in price, driving yields to levels not seen since the 1950s. Mortgage rates are also at record low levels.