WASHINGTON -- The Federal Reserve Board reported yesterday that the economic slump is gradually sweeping across the United States and is no longer as regionally isolated as it was a few months ago.
The Fed said that the slowdown is beginning to have a sharp impact on manufacturing, previously a bright spot in the economy. Weak domestic demand for manufactured goods is being offset only partially by strong exports, the central bank said.
Consumer spending, one of the driving forces behind economic growth until the middle of the year, seems especially weak, just as retailers gear up for the holiday rush.
The "beige book" compilation of surveys in the Fed's 12 districts is issued eight times each year, just before the Fed's policy-makers meet to determine interest-rate policy.
The Fed's Open Market Committee, which determines the course of national monetary policy, plans to meet Dec. 18 in Washington, and analysts increasingly expect a decision to ease interest rates.
Yesterday's report could give advocates of easier monetary policy more ammunition.
"In many of the Federal Reserve districts, economic activity appears to have declined recently, while it has remained sluggish or grown slowly in the rest," the report said. "Manufacturing conditions have weakened in most districts . . . [and] retail sales appear to have fallen from their year-ago levels."
In the 5th District, which includes Maryland and other mid-Atlantic states, respondents indicated that economic activity was generally slower in early November, the report said.
As sales of big-ticket items and department store business slowed during October and early November, retailers in the district blamed a combination of warmer-than-usual weather and reduced consumer confidence.
Sales did, however, become unexpectedly more robust in the three days following Thanksgiving, and retailers have been able to lower inventories, the report said.
Export sales for the district were higher than they were a year ago, and they are expected to rise faster than imports over the next six months.
Respondents from the area's financial institutions pointed to weakness in financial markets in the first three weeks of November. Loan demand and credit availability were both down for the period -- though rates were virtually unchanged -- as borrowers used already established lines of credit only sparingly.
Banks in the district said that "quality customers with sound management and sufficient documentation should find adequate credit available," according to the report.
But some respondents from small businesses said they had difficulty in securing ample credit, and in some metropolitan areas, real estate development loans have reportedly "dried up," the report said.