The word of the month was “weak” in the Federal Reserve’s “Beige Book” released today with five of the 12 Federal Reserve districts using “weak,” “weaker,” or “weakened” to describe economic conditions though January 5.

The report suggested the economic slump could extend through 2009 -- and perhaps beyond, echoing the assessments offered by President-elect Obama.

The Beige Book, officially “Summary of Commentary on Current Economic Conditions By Federal Reserve District” was prepared for the January 27-28 of the Federal Open Market Committee. The FOMC last met December 15-16 and cut the target federal funds rate to a range of 0% to 0.25%, a historic low.

Federal Reserve Board Chairman Ben Bernanke in a speech before the London School of Economics Tuesday all but ruled out a further rate cut.

“The Fed still has powerful tools at its disposal to fight the financial crisis and the economic downturn, even though the overnight federal funds rate cannot be reduced meaningfully further,” Bernanke said.

The Fed report downplayed concerns about inflation.

“Consumers saw sizable holiday price cuts in retail stores in a majority of the districts,” the report said, adding “input” or material prices were reduced suggesting retail prices will remain low or continue to fall in the near future.

According to the report, “Boston reported large price decreases for energy, oil-based materials, paper, and cotton in particular." 

The Dallas district reported the sharp declines in oil prices led to a decline in drilling activity with a 15% drop in the number of oil rigs from August, a drop which would ultimately lead to higher prices for energy products.

Most Districts, the Beige Book report said, “noted reduced or low activity across a wide range of industries, although a few Districts noted some exceptions in some sectors.”

District reports indicated retail sales were generally weak during the holiday season despite deep discounting by retailers along with declines in manufacturing activity.

At the same time, the report said the services sector generally declined except in Boston, Richmond, and Chicago.

Conditions in residential real estate markets continued to drop in most districts with reduced home sales, lower prices, or decreases in construction activity. Commercial real estate markets deteriorated as well in most districts, with construction declines in that segment.

The report noted the continuing credit crunch asserting “overall lending activity declined in several districts, with tight or tightening lending conditions reported in most districts.” Credit quality, the report said “remained a concern in several districts.”

The report also provided anecdotal evidence to support data describing weak labor markets. “Wage pressures,” the report said, “remained largely contained, and some districts reported pay freezes or reductions in compensation.”

Here’s quick recap of conditions district by district:

1^st District (Boston): Business activity “continued to slow at the end of 2008” and contacts “expect more of the same or further softening, at least through the first quarter.”

2^nd District (New York): The Second District’s economy “weakened somewhat more since the last report, though some sectors appear to have stabilized.” Tourism in New York City “slowed further in November and December” and “both residential and commercial real estate markets were mixed.”

3^rd District (Philadelphia): Business conditions “remained soft” as manufacturers “reported declines in shipments and new orders…retailers indicated that sales were far below the level of a year ago, and motor vehicle dealers reported continued sluggishness in sales.”

4^th District (Cleveland): Economic activity “weakened further during late November and December” and “the downward trend in factory output and steel shipments that began in the middle of the third quarter continued.” Residential construction, the report said “remains very weak, with no improvement expected during 2009.”

5^th District (Richmond): Economic activity “slowed further in recent weeks, with disappointing holiday retail sales, declining activity at District ports, and continued weakness in real estate.”

6^th District (Atlanta): Economic conditions “were weak through December. Holiday sales results were near or below year-ago levels and auto sales were dismal.” Labor markets in the district “weakened further through the end of the year with contacts across most industries noting additional layoffs and reduced hours.”

7^th District (Chicago): Economic activity “declined further in December, with contacts noting lower consumer and business confidence…”contacts reported increased concern with expenses given declining economic activity and rising uncertainty over the economic outlook.”

8^th District (St. Louis): The economy “continued to decline since our previous report… manufacturing activity weakened further and the services sector contracted.” Residential real estate market activity “continued to decrease” though commercial real estate markets have held steady but commercial and industrial construction activity has softened.”

9^th District (Minneapolis): Economic activity decreased slightly in most sectors since the last report” with decreased activity “noted in consumer spending, tourism, services, construction and real estate, manufacturing, energy, mining and agriculture.” Prices, the report said “continued to decrease since the last report, but the pace of decline seems to have stabilized.”

10^th District (Kansas City): Economic activity “deteriorated in December” as “consumer spending weakened, and expectations for future spending declined further.”  Labor market conditions, the report said, “weakened further, leading to fewer wage pressures and lower salary increases for 2009.”

11^th District (Dallas): Economic conditions “continued to weaken from mid-November to year-end 2008.” The report cited “reduced demand and uncertainty about the outlook” adding “most respondents don’t expect conditions to improve until the second half of 2009 with a growing number of respondents now looking at early 2010.

12^th District (San Francisco): Economic activity “weakened on net during the survey period of December through the beginning of January” adding “upward price pressures continued to ease overall, largely as a result of declines in the prices of energy and some commodities, and upward wage pressures have largely disappeared.” Housing market conditions “remained feeble.”

Mark Lieberman is the senior economist for the Fox Business Network. Prior to joining FOX, he served as first vice president and manager of economic analysis and research at Washington Mutual in New York. Before that, he served as senior vice president at Dime Savings Bank of New York (which was later acquired by Washington Mutual), where he specialized in credit and risk management. He is a member of the Executive Committee of the New York Association for Business Economics. He has a degree in Economics from the Wharton School of the University of Pennsylvania.