WASHINGTON — The U.S. economy expanded in the last two weeks of July and in August, though there were significant regional variations and growth slowed compared with earlier in the summer, the Federal Reserve reported Wednesday.

The Fed’s anecdotal survey, known as the Beige Book, was based on interviews with businesses in the central bank’s 12 districts and substantiates previous reports from retailers of uneven back-to-school sales.

“Retail sales were described as solid in San Francisco, mixed in Dallas and softer in New York, Richmond, and Chicago,” the Fed said, noting sales for these regions were ahead of year-ago levels. “Sales of back-to-school items, especially children’s apparel, reportedly were disappointing for retailers in New York, Cleveland, Richmond, Chicago and St. Louis. By contrast, Kansas City indicated that sales of these items were up solidly from previous years and Philadelphia noted that they were in line with merchants’ expectations.”

The Fed said its district banks reported strong demand among manufacturers in most parts of the country, with particular increases seen in areas such as electronics, steel and machinery. However, the St. Louis region reported manufacturing declines, with plant closings in the home fixtures and furniture categories.

Fed chairman Alan Greenspan cited growth in manufacturing, as well as increases in business investment and new housing, as among signs that the economic “expansion has regained some traction,” according to his prepared testimony to the House Banking Committee.

Greenspan said that “readings on retail sales in August have been mixed” and that higher gas and other energy prices drained some of the earlier gusto from consumer spending habits.

The economy had slowed during the year after posting a 4.5 percent gain in the Gross Domestic Product in the first quarter and then dropping to 2.8 percent growth in the second quarter.

The boost in manufacturing has caused increased demand for transportation, according to the Fed report.

“Cleveland, Chicago, St. Louis and Kansas City reported strong demand for overland shipping services, which resulted in bottlenecks in freight movement in some areas,” the Fed said. “According to the San Francisco district, high volumes of international trade kept several West Coast seaports operating at capacity, which also led to increased demand for rail services. Similarly, New York noted that volume through the Port of New York and New Jersey rose substantially in July and August.”

This story first appeared in the September 9, 2004 issue of WWD. Subscribe Today.

Another economic plus was flat-to-moderate increases in consumer prices, with energy, steel, lumber and other building materials among the exceptions. On the economic downside, the Fed said labor market shortages for skilled workers created pressure for higher wages.

In addition, “reports continued to note concerns among businesses about the rising cost of health care and other employee benefits,” the Fed said.

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