By Associated Press
July 29, 2004

WASHINGTON -- The Federal Reserve found that economic conditions around the country worsened in June and early July while the Commerce Department said orders for big-ticket manufactured goods managed only a 0.7 percent rise last month, the latest signals that the economy was slowing in the early summer.

The Fed's survey, compiled from reports from its 12 regional bank districts, showed that retail sales, especially for autos, weakened over the last two months. That followed a big jump in consumer activity in the early spring.

Meanwhile, the Commerce Department reported that orders to American factories for big-ticket durable goods eked out a small 0.7 percent gain in June, reflecting a surge in orders for military aircraft, following declines in April and May.

The two new reports were the latest evidence of what Federal Reserve chairman Alan Greenspan told Congress last week was a ''soft patch" developing in the economy in June. However, Greenspan indicated he believed the slowdown would be temporary.

Private economists generally agree, although they caution that the next few months will determine whether the current recovery regains altitude or whether the slowdown worsens.

The Fed's report, known as the beige book for the color of its cover, will be used when central bank policy makers meet on Aug. 10 to decide whether to raise interest rates to ensure that inflation does not get out of hand.

In New England, the Boston Fed said reports from business contacts were somewhat more mixed in early July than they were six weeks earlier and that some retailers and manufacturers were less upbeat.

The new survey found both in the region as well as in the nation that wholesale prices, especially of such commodities as energy, steel, and cement, were rising but that little of those price increases outside of energy were passed on to consumers.

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