Federal Reserve Hints At Looming U.S. Slowdown

Fed hints at looming US slowdown

http://news.bbc.co.uk/2/hi/business/5081394.stm

6/12/2006

Despite recent growth in the US, there are signs the economy could be slowing down, the US Federal Reserve has said.

While overall economic activity grew between April and June, consumers are showing signs of caution as energy prices rise, the Fed's Beige Book said.

Particularly hard hit are lower income families, as sales at low price discount stores weakened.

The Beige Book, based on information from 12 regional Federal Banks aims to give a snapshot of the US economy.

"High gasoline prices were cited by a few districts as changing purchasing patterns or clouding the outlook for sales," the Fed survey said.

Rising prices
The Fed added companies had also raised concerns about inflation, with some manufacturers forced to raise prices as raw material costs increased.

As well as fuel, the price of oil-based products, metals and many building materials had risen over the past three months, the Fed said.

Concerns about rising inflationary pressures have pushed the central bank to raise rates at its past 16 meetings, to five year highs of 5%.

Experts widely expect the Fed to raise rates at its next meeting in the face of current inflationary pressures, but have raised concerns that another hike could crimp US growth.

The Beige Book appeared to confirm such beliefs, saying that while overall economic activity grew during the three months to early June "there were some signs of deceleration".

It added that four of the 12 regions surveyed had reported a slowdown in activity, while seven districts said activity had remained unchanged.

Philadelphia was the only area to report an improvement.