Fed Says Economy ‘Sluggish’ Before Attacks

The Federal Reserve said Wednesday that the U.S. economy was “sluggish” even before the terrorist attacks of Sept. 11.

In its regular Beige Book report, the Fed said that there was some boost to the economy because of back-to-school spending, but that consumer spending was “flat to down.” The report, called the Beige Book because of the color of its cover, is drawn from information in each of the Fed’s 12 district banks and published eight times each year.

The report said that manufacturing continued to have “broad based” softness. Manufacturing activity is a chief source of business for the trucking industry and continued softness in that sector will lead to fewer shipments for truckers.

This edition of the report was compiled from information gathered before Sept. 10, so it shows no evidence from the post-attack economy. Reuters said analysts have speculated that the attacks on the World Trade Center and the Pentagon may have sapped consumer confidence and pushed the economy from a period of anemic growth into a full-fledged recession.

U.S. home sales were strong, according to the report, but the commercial real estate market showed weakening demand. That is likely to change, especially in the New York City area, after the attack.

Price pressure was generally “restrained” in all of the Fed’s 12 districts. Labor markets “continued to ease” according to the report. The Federal Reserve Bank of Cleveland said that unions were choosing to negotiate for job security rather than higher wages, according to Reuters.

Under normal circumstances, the Fed would look at these figures very closely before its Oct. 2 meeting. As it is, many observers believe the Federal Reserve will cut its main short-term interest rates to maintain economic growth in the wake of the attacks, Bridge News reported.

7864