Consumer and business spending declined with the start of war in Iraq, the Federal Reserve said in its latest Beige Book report on current economic conditions.
"The pace of economic activity continued to be lackluster during March and the first two weeks of April," the report said. It pointed to weakness in manufacturing, while consumer spending fell and businesses remained cautious.
The Beige Book report is published eight times a year, and collects data from the Fed's 12 regional banks.
Not all the data indicated sluggishness, however. The Fed said "some pockets of growth were noted" in manufacturing in most regions. Real estate and construction continued to show strength across all districts, while "mortgage lending, buoyed by refinancing activity, remained strong."
Although retail sales were weak, most reports showed that retailers weren't concerned with inventory levels.
On the consumer level, the weakness was attributed to poor weather and the onset of war. "It is too early to ascertain the full effect of the war on both consumer and business confidence," the report noted.
As for the labor market, the study observed continued weakness, with "substantial layoffs in March and early April." But there were "hints of improvement," as a few states reported fewer plans for layoffs and others noted stronger demand for temporary workers.