A broad slowdown in economic activity was under way by the end of September, according to the latest report on economic activity released Wednesday by the Federal Reserve.
Consumer spending was down in most regions. Factory activity was also slow.
Even more worrisome was the downturn in “nonfinancial services,” which has been the backbone of economic activity.
Residential real-estate and construction activity weakened or remained low, according to the report, known as the Beige Book. Most districts also reported slower commercial real-estate activity.
At the same time, credit was scarce as banks tightened standards due the stresses on the financial system. There were reports that loan quality had deteriorated. Bank customers were taking steps to move their savings into accounts covered by deposit insurance.
After reports throughout the year of higher prices, this Beige Book found that inflation pressures did ease a bit, especially on the retail side.
Labor-market conditions also deteriorated and wage pressures remained muted.
The agricultural sector was one bright spot, the report said.
The Beige Book, named for the color of the report, is designed to give the Fed a better feel for economic conditions in the run-up to its next policy meeting, scheduled for October 28 to 29.
The financial market is expecting another interest-rate cut.
The Beige Book is a series on anecdotal reports collected by the 12 regional Fed banks. This report was collected by the Chicago Fed.
William Poole, former president of the St. Louis Fed, said recently that the Beige Book is not influential for policy-makers.
Fed officials receive much more information from government reports, he added.
But sometimes the central bank can pick up trends before the data catch them. The scope of the weakness may surprise Fed officials.
All 12 Fed districts reported weakness, the report said. Several districts said their contacts had become more pessimistic about the economic outlook.