BBC Wednesday, 2 May, 2001, 18:56 GMT 19:56 UK

US economic gloom spreads nationwide

The US economy eased into the second quarter of 2001 showing only mild growth, the country's central bank has said in a benchmark report.

The economy was continuing to absorb weak retail sales, falling factory orders and higher energy costs, the US Federal Reserve said in its latest 'Beige Book' survey.

"Almost all districts report a slow pace of economic activity in March and early April," said the report, which is based on information supplied by the Fed's 12 regional offices.

"Industrial activity has continued to weaken, with orders and production having fallen in many districts."

But the survey failed to scare investors, with both the broad ranging Dow Jones and tech-heavy Nasdaq indices standing in positive territory, and above early lows, half an hour after the report was published.

Interest rates

The report offered some hope for observers worried about the slowdown in the world's largest economy, saying retail sales appeared to strengthen in April.

The survey's sombre tone is also likely to increase pressure on the Federal Reserve to reduce interest rates at a 15 May meeting, especially as earlier concerns over inflation seem to have subsided.

Wednesday's report noted little pressure on prices, and an easing in the country's labour market.

"Upward wage pressures have generally abated," the survey said.

"Wages are rising very moderately or are unchanged in most parts of the country."

Rocketing energy costs

But the Fed warned of rising energy costs, which have "hit historic highs in some areas", and have hit particularly the trucking industry.

In some districts, such as Dallas, rises in energy costs have passed on to customers in the form of fuel surcharges.

"Hikes in electricity costs are concerns in both the Philadelphia and, especially, San Francisco districts," the report added.

An interest rate cut at the 15 May meeting would be the fifth ordered by the Fed this year in response to the US economic downturn.

-- Anonymous, May 03, 2001