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Updated Friday, September 10, 2010 9:48 pm TWN, AP

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Fed survey sees slower growth in US regions

“Bottom line: The Fed ... was surprisingly frank in describing an economy that is in the process of losing momentum,” said Brian Bethune, economist at IHS Global Insight. He said pressure is mounting on the Fed to take more action to help. “The ailing economy needs more oxygen pumped into it in order to nurse it through a critical phase of the recovery,” Bethune said.

At its August meeting, Bernanke persuaded all but one of his Fed colleagues to support a plan to buy a small amount of government securities to try to give the economy a boost.

The Fed survey also found that five regions — St. Louis, Minneapolis, Kansas City, Dallas and San Francisco all reported modest growth. And two regions — Boston and Cleveland — reported improved economic activity.

All that helps explain why Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, voted against the Fed's relief action in August. He says he thinks the national economy will keep growing and get through any soft patches without any extra help from the Fed.

But Narayana Kocherlakota, president of the Federal Reserve Bank of Minneapolis, said in a speech Wednesday that he would have backed the Fed's August action if he were a voting member this year. (He will be a voting member next year.)

Kocherlakota struck an optimistic note that the U.S. economy will keep growing and avoid falling back into a recession. “I believe that a modest recovery is under way and is likely to continue,” he said.

Nationwide, consumers, while cautious, are continuing to spend to keep the economy expanding, the Fed survey said. Manufacturing is growing but at a slower pace than seen earlier this year.

Home sales weakened, which, in turn, has weighed on construction activity, the Fed said. And companies continue to be cautious about hiring full-time workers. Businesses in Philadelphia and Atlanta, for instance, reported relying instead on temporary and contract workers to meet any increases in customer demand.

The Fed's region-by-region survey is based on information collected from the Fed's 12 regional banks on or before Aug. 30. It provides a more intimate look at the overall economy than broad statistics.

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