The following is an unedited transcript of the news release from the Federal Reserve Board.


Reports from the twelve Federal Reserve Districts suggest that economic growth has slowed since the beginning of the year. Two-thirds of the Districts cited softening or weakening in the pace of business activity, while the others referred to subdued, slow, or modest growth. Retail activity in most Districts was reported to be weak or softening, although tourism generally continued to expand. Services industries in many Districts, including staffing services in Boston, port activity in New York, and truck freight volume in Cleveland, appeared to be slowing, but activity in services provided some positive news in Richmond and Dallas. Manufacturing was said to be sluggish or to have slowed in about half the Districts, while several others indicated manufacturing results were mixed or trends were steady.

Residential real estate markets generally remained weak; reports on commercial real estate markets were somewhat mixed, but also suggest slowing, on balance, in many Districts. Most Districts reporting on banking cite tight or tightening credit standards and stable or weaker loan demand. Districts reporting on the agriculture and energy sectors said activity is generally strong.

Upward pressure on prices from rising materials and energy prices was noted in almost all the District reports, but Philadelphia said increases in input costs and output prices had recently become less prevalent, and San Francisco indicated pressures were limited for products other than food and energy. By contrast, wage and salary pressures were generally said to be modest, as the hiring pace slowed in various sectors and labor markets loosened somewhat in many Districts.

Consumer Spending and Tourism

Reports on retail spending were generally downbeat, although Boston, St. Louis, and Dallas described sales as mixed and Kansas City reported that consumer spending was """"largely unchanged"""" since the previous survey period. The majority of Districts characterized sales as below plan, downbeat, weak, or having softened. Among product categories, apparel sales were soft in New York, Philadelphia, and Richmond, but strong in Boston. Several Districts noted declines in sales of big-ticket and/or home-related items.

Districts commenting on vehicle sales described them as slow or sluggish, with little exception. Contacts in Dallas attributed an uptick in auto sales to increased advertising and incentives. Chicago dealerships reported some increases in used car sales in February. Dealers in the Philadelphia District expected sales to increase later in the year, but Cleveland did not expect significant change in the upcoming months.

The majority of reports on tourism were positive, on balance, although most Districts mentioned some areas of softening. The San Francisco District commented that while tourism in Hawaii had fallen from previous levels, activity in California remained stable, partly because of growing foreign travel resulting from the lower exchange value of the U.S. dollar. Minneapolis reported an increase in tourism activity generally relating to winter sports. Tourism and travel in Kansas City, Atlanta, New York, and Chicago were also mostly positive.

Nonfinancial Services

Reports from nonfinancial services industries were mixed. Health-care services expanded in the Richmond, Minneapolis, and San Francisco Districts, while contacts in the St. Louis District reported a softening and plans to lay off workers. Software and IT services respondents in Boston reported modest growth.

Available reports from staffing firms pointed to mixed demand for temporary labor. The Boston, New York, Richmond, and Atlanta Districts reported weaker staffing requests relative to a year ago; Cleveland, Chicago, and Dallas reported stable to increased demand. Boston noted increased demand from the biopharmaceutical and aerospace industries, while Dallas contacts saw an increased demand for temporary workers in IT, engineering, and oil-related services. A large New York employment agency found that despite widely announced layoff plans at financial firms, they saw no noticeable increase in the number of job candidates. Boston and Atlanta noted improved labor supply.

All Districts reporting on transportation services noted weaker activity in the first quarter of 2008 compared with the previous quarter. Trucking and shipping respondents from the Richmond and Dallas Districts reported declining import volumes, which more than offset growth in exports, stimulated by the depreciation of the dollar. However, airlines in those Districts reported higher passenger volumes since the start of the year.

Manufacturing

Reports on the manufacturing sector were mixed but, on the whole, subdued. New York, Philadelphia, Richmond, Kansas City, and Dallas indicated that production or shipments were sluggish or falling. Atlanta, Minneapolis, and San Francisco characterized activity as varying across industries. Boston, Cleveland, and Chicago indicated stable levels or trends. Only St. Louis noted a strengthening relative to prior reports.

Various Districts cited strong demand for steel, aircraft and parts, energy-related equipment, and exports, but mostly continued weak markets for products and equipment used for building and furnishing homes. Atlanta, Chicago, and Dallas indicated that automotive production and sales have been light or declining. On the other hand, the Cleveland District saw an uptick in the production of foreign nameplates during January, and St. Louis was anticipating additional capacity and employment in automotive parts manufacturing. Dallas reported that refining production fell in the face of weak margins. Reports on food processing were mixed, with some Districts indicating that high prices were constraining demand, while others cited rising demand. Boston and New York mentioned that some manufacturers are experiencing slower payments from their customers.

All Districts commenting on the near-term outlook mentioned caution or concern on the part of at least some segments of manufacturing. Boston, Philadelphia, Kansas City, and San Francisco indicated that some firms are adjusting their hiring or capital spending plans downward. A couple of Districts mentioned risks associated with financing constraints. For example, Chicago cited concerns on the part of the auto industry that tight credit would cause its customers to become more price-sensitive and less able to obtain car loans.

Real Estate and Construction

Residential real estate markets were generally weak over the last couple of months. Sales were low in every District with very few local exceptions. Sales declines were particularly large in the Boston, Minneapolis, Richmond, and St. Louis Districts; at least some respondents in each of these Districts reported drops in home sales of more than 20 percent year-over-year. Contacts in the Chicago, Kansas City, and Philadelphia Districts cited tight credit conditions as a reason for low sales; each of those Districts either reported or expected stabilization of demand for homes in the low and mid-price ranges.

Districts that reported home prices all saw overall declines; one exception was the Manhattan co-op and condo market, where prices increased 5 percent compared with a year ago. Inventories remained high as demand was still fairly low. A few contacts in the Chicago, Cleveland, and Richmond Districts reported an increase in inquiries, although this increase in traffic had not yet translated into increased sales. Residential construction declined or remained at low levels in most Districts.