U.S. Economic Recovery Running Out of Steam, Fed Suggests

Updated: Wednesday, 28 Jul 2010, 1:28 PM MST
Published : Wednesday, 28 Jul 2010, 1:28 PM MST

By Luca Di Leo

(Dow Jones) - U.S. economic activity rose only modestly in June and the first half of July, the Federal Reserve said in a report Wednesday, another sign the recovery may be running out of steam.

In its latest beige book report, the central bank said economic conditions continued to improve in most of its 12 regional districts, but the advances were modest, with retail sales posting only small gains and housing and construction remaining weak. Bank lending still remained tight.

The U.S. economy has been expanding at a moderate pace for most of the past year, gradually recovering from the deepest recession in many decades. However, economic data for June have pointed to a possible slowdown, especially in consumer spending and in an already weak housing sector.

The beige book is a summary of economic activity prepared for use at the U.S. central bank's next policy-setting meeting Aug. 10.

In its previous report, released June 9 and referring to May and April, the Fed said economic activity had improved across all of its 12 districts.

Retail sales reported during the early summer months were generally positive, the Fed said, although the increases were small in most regions. Most Fed districts that reported on auto sales noted declines in recent weeks.

At their last meeting June 22-23, Fed officials trimmed their forecast for U.S. economic growth, citing the deterioration in financial markets that followed Europe's sovereign debt crisis.

Last week, Chairman Ben Bernanke warned there was "unusual uncertainty" over the economy's outlook. He told Congress the Fed, which has already slashed interest rates close to zero, was ready to take further measures to support the economy if necessary.

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