Washington, July 29--The Federal Reserve reported that the U.S. economy cooled off in June and July as consumer spending, especially on autos, slowed significantly after a big surge in early spring.
"Federal Reserve districts reported that economic activity continued to expand in June and early July, although several districts reported that the rate of growth moderated," the Fed said in its latest "beige book" report.
Five of the 12 Federal Reserve districts said economic activity had "slowed somewhat," while growth rates in most other districts ranged from modest to solid, the Fed said. Slower growth was reported in the New York, Cleveland, Richmond, Kansas City and San Francisco districts.
The beige book is a summary of economic activity prepared for use at the central bank's next Federal Open Market Committee meeting on Aug. 10. The most recent report was prepared by the Federal Reserve Bank of Cleveland and reflects information gathered before July 19.
The survey was the latest indication of what Federal Reserve Chairman Alan Greenspan termed a "soft patch'' developing in the economy in June. Much of the weakness was attributed to a slowing in consumer spending, particularly on cars. However, the Fed report said that there were "pockets of weakness" in manufacturing as well.
The new survey found that wholesale prices, especially of such commodities as energy, steel and cement, were rising, but that little of those price pressures outside of energy were being passed on to consumers.
Because consumer prices outside of energy have remained moderate, most analysts believe the Fed will stick to its plan to raise rates at a moderate pace in coming months. They are forecasting another quarter-point increase in the federal-funds rate at the Fed's coming meeting. The Fed raised the funds rate for the first time in four years on June 30.
The Fed survey depicted travel and tourism, hit hard after the 2001 terrorist attacks, as "strong" and said that residential construction remained healthy as well despite the fact that mortgage rates are now up from their four-decade lows.
In its previous beige book report published June 16, the Fed said the U.S. economic recovery broadened in April and May in most regions, while inflation remained tame.
