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To: incomep who wrote (8921)	5/2/2001 3:43:13 PM
From: Tom Hua	Respond to of 19633

Wednesday May 2, 2:40 pm Eastern Time Fed: Economy Slow in March, Early April By Jonathan Nicholson WASHINGTON (Reuters) - The Federal Reserve painted a mildly downbeat picture of the U.S. economy at the beginning of the second quarter of this year, noting slow growth and a steady weakening in manufacturing activity. ``Almost all districts report a slow pace of economic activity in March and early April,'' the Fed said on Wednesday in its periodic ``beige book'' summary of national economic activity, which will be used by U.S. central bankers when they meet to decide interest-rate policy on May 15. The report's somber tone is likely to reinforce expectations that on May 15 the Fed will reduce interest rates for a fifth time this year -- especially since it noted little or no price pressures and slacker conditions in the nation's formerly drum-tight labor markets. ``Industrial activity has continued to weaken, with orders and production having fallen in many districts,'' the Fed said. ''Labor market tightness has eased in almost every district.'' One worrisome sign was a pick-up in energy prices -- in some areas to historic highs -- that the Fed said was replacing its earlier worry over rising wage pressures. The U.S. central bank already has slashed short-term interest rates by a full two percentage points in four equal installments this year, seeking to spur the economy out of a slowdown that set in about mid-2000. While the Fed has said it remains more worried about weakness in the economy than the prospect for inflation, the beige book report suggested some reason for concern about the impact of rising energy prices. The U.S. trucking industry was being hard hit by high gasoline prices and the Fed said that some industries ``are increasingly passing on these high costs to customers as fuel surcharges.'' It also noted hikes in electricity costs that it said were concerns in Philadelphia and especially in San Francisco. Some industries were holding up well amid a generally weaker economic outlook at the start of the second quarter. In particular, the Fed noted that new home sales and construction ''have been picking up or steady,'' helped by cheaper interest rates that have benefited builders and buyers. The Fed said that retail sales strengthened in April from a weak March. One hopeful sign was that retailers in most districts said they were not overburdened with excess inventories. ``Still, retailers in most districts are expecting only small gains, at best, in upcoming months,'' the beige book said. But other industries continued to struggle. ``The high-tech and telecommunications industries are experiencing a pronounced slowdown,'' the Fed said, citing six of the 12 Fed regions as reporting declines in sales or new orders of computer equipment. The report's tone was a bit bleaker than the last beige book summary, released March 7. In that report, the central bank said a majority of Fed districts saw ``sluggish to modest economic growth'' in February as labor markets mostly remained tight.