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Fed saw more weakness
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September 19, 2001: 12:57 p.m. ET
'Beige book' report notes continued weakness in August, early September
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NEW YORK (CNNfn) - The Federal Reserve said the U.S. economy was slowing even before the worst terrorist attacks in U.S. history, according to its periodic "beige book" report, released Wednesday.
"Reports from Federal Reserve districts generally indicated that overall economic activity remained sluggish in August and early September, with several suggesting that activity slowed further," the Fed said.
The Fed saw "broad-based" manufacturing weakness, sluggish consumer spending and a "soft" labor market in August and early September, according to the report, named for the color of its cover.
The Fed has cut its target for short-term interest rates eight times this year in an effort to fend off a recession. The eighth cut was made Monday, mostly in an effort to soothe worried stock markets in wake of the Sept. 11 terrorist attacks that destroyed the World Trade Center and damaged the Pentagon.
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Many economists expect those attacks to tip the U.S. economy into a downturn that could turn into a recession, commonly defined as two consecutive quarters of shrinking gross domestic product (GDP).
The beige book report compiled comments from the Fed's 12 regional banks -- all taken just before the attacks -- and will be used when policy-makers meet on Oct. 2 to discuss interest rates. Most economists expect the Fed to cut rates again at or before that meeting.
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Even before the attacks, there were ominous signs about the health of the world's largest economy. Sluggish consumer spending was especially worrisome, since it drives two-thirds of the U.S. economy.
The back-to-school season, usually the second-busiest time for retailers after Christmas, boosted spending a little; but advance payments of 2001 tax credit, commonly called "rebates," had little effect on spending, the Fed said.
Meanwhile, manufacturing, which has been in a recession for about a year, continued to suffer, though there were "positive signs" in some reports. Boston, New York, Chicago and Kansas City reported that activity seemed to be stabilizing.
Fed Chairman Alan Greenspan is reportedly scheduled to meet with leaders of Congress Wednesday afternoon to discuss what can be done to help the economy. 
- from staff and wire reports
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Beige book report
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