- The Washington Times - Thursday, October 24, 2002

The United States has been struggling with a "sluggish" economy over the past two months with weak retail sales, tough times in manufacturing and a lackluster job market, the Federal Reserve reported yesterday.
The Fed, releasing the findings of surveys done by its 12 regional banks, found an economy performing at subpar levels as the country struggles to mount a sustainable rebound from last year's recession.
The Fed's new survey clearly left the door open to further cuts in interest rates when Fed policy-makers next meet Nov. 6, the day after Election Day.
The Fed has left a key interest rate at a 40-year low of 1.75 percent all this year, since an 11th rate cut last December, when the Fed was aggressively lowering borrowing costs in an effort to combat the country's first recession in a decade and the economic shocks from the terrorist attacks.
So far this year, the economy has grown in fits and starts with strong consumer spending for new homes and autos offset by a number of uncertainties, ranging from what a possible war in Iraq will do to oil prices, to what the plunge in stock prices will do to already-weak consumer and business confidence.
Some analysts believe the Fed will cut rates for a 12th time at the November meeting to make sure falling consumer confidence and worries about a war with Iraq don't push the country into another recession, the feared "double dip."
Two Fed policy-makers cast rare dissents at the last meeting Sept. 24, arguing that the majority decision to leave rates unchanged was wrong in light of growing signs of weakness.
However, some analysts remain unconvinced the Fed will move to reduce rates in November. Many believe the central bank will be content to remain on the sideline, saving its cuts in case they are needed should a war with Iraq further destabilize the U.S. economy.
In its latest survey, known as the "Beige Book" for the color of its cover, the Fed said, "Most districts reported that economic activity remained sluggish in September and early October."
The survey found that retail sales were weak in many districts, with auto sales cooling off after a surge earlier this year triggered by attractive financing deals that automakers have been able to offer because the Fed has kept interest rates so low.
The Chicago, Dallas, Kansas City and San Francisco districts all reported retail sales had slowed in the past two months.
The Fed survey found manufacturing, which has been the hardest-hit sector of the economy for more than two years, continued to face tough times with districts using terms such as "tough," "stagnant" and "sluggish" to describe manufacturing conditions.
Richmond reported shipments, new orders, factory-operating rates and manufacturing employment all declined during the survey period, while Dallas and Chicago reported weak demand.
Overall, the Fed survey found that the job market remained "lackluster, with only a few reports of increased hiring."
Because of the weak labor markets, wage pressures were found to be subdued and inflation overall was reported as stable, a development that would give the Fed room to cut interest rates further without worrying that it was sowing the seeds for price pressures down the road.

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