Fed: 'Widespread signs' economy is slowing

NEW YORK (CNNMoney.com) -- The economy grew at a sluggish pace through the summer months, and there are now "widespread signs" that activity is slowing, the Federal Reserve said Wednesday in its latest snapshot of regional economic conditions.

Economic growth continued at a modest pace in 7 of the central bank's 12 districts, according to the September edition of the Fed's Beige Book, which is published eight times a year.

The western districts, Boston and Cleveland were among those reporting modest economic growth from mid-July through the end of August. But New York, Philadelphia, Richmond, Atlanta, and Chicago all reported mixed conditions or deceleration in overall activity.

Despite persistently high unemployment, the Fed said consumer spending appeared to increase in most districts. Manufacturing activity expanded in general, although at a slower pace in some areas.

The Fed said home sales, which were weak in the July edition, slowed further after a popular home buyer tax credit expired in June. Commercial real estate was also weak, with vacancy rates high and rents falling in most districts.

Meanwhile, the job market remained depressed in most regions.

In two districts, Philadelphia and Atlanta, hiring of permanent employees was held down by employers' continued reliance on temporary workers. But some employers in the Boston area converted temporary employers into full-time employees.

While a few districts reported mismatches between the skills certain workers have and the jobs they were applying for, the general trend was that qualified applicants outnumbered the job openings available.

The mixed picture is in line with government data released last month that showed U.S. gross domestic product, the broadest measure of economic activity, was much weaker in the second quarter than previously estimated.

The nation's GDP was revised sharply lower to an annual growth rate of 1.6% in the three months ending in June. The initial reading had been for a 2.4% growth rate in the period.

Fed chairman Ben Bernanke acknowledged in a speech late last month that the U.S. economic recovery has lost considerable steam. But he said the central bank is prepared to use "unconventional measures" to boost the economy if the outlook were to "deteriorate significantly."

In its Aug. 10 policy statement, the Fed announced plans last month to begin reinvesting proceeds from securities in its $2 trillion portfolio in to U.S. Treasurys. The central bank had bought billions worth of government debt two years ago to keep interest rates low on home and other consumer loans. But minuets from the August meeting subsequently showed that Fed officials were unusually divided over the policy.