Beige Book Highlights Price Concerns

U.S. economic activity remained generally weak between mid-April and May, with concerns over inflationary pressures taking center stage, the Federal Reserve reported Wednesday in its regional survey known as the beige book.

The report, published for the fourth out of eight times this year, summarizes business activity in the Fed's 12 districts. While most reports characterized growth as weaker, softer, lower and sluggish, five districts reported that economic growth was stable or little changed.

Consumer spending slowed in a number of districts due to higher energy and food prices, which has lately led to concern over inflation and prompted many Fed officials to warn about rising prices.

"Repeated increases in energy prices and their effect on overall inflation have contributed to a rise in the year-ahead inflation expectations of households, especially this year," Fed Vice Chairman Donald Kohn said at an economic conference in Washington, D.C., earlier Wednesday. "Of greater concern is that some measures of longer-term inflation expectations appear to have edged up since last year. Any tendency for these longer-term inflation expectations to drift higher or even to fail to reverse over time would have troublesome implications for the outlook for inflation."

Because of the slowdown in consumer spending, seven districts polled in the beige book said retail sales moderated. The districts reported that overall sales of automobiles and light trucks were weak, with several indicating that sales of trucks and SUVs declined because of climbing fuel prices. Ford(F Quote) and General Motors(GM Quote) last month said they would alter production schedules to adjust to consumer demands.