Underscoring the widespread economic downturn and reinforcing the recession label,  Federal Reserve reported Wednesday in its Beige Book “economic activity weakened in September across all twelve Federal Reserve Districts,” the same language used in the report issued in the last assessment of the nation’s economy.

The weakness was broad-based, according to the report, affecting virtually every aspect of the economy:

• Districts generally reported decreases in retail sales, and vehicle sales were down significantly
• Tourism spending was described as “subdued”
• Reports on the service sector were “generally negative”
• Manufacturing activity declined in most Districts, and new orders were soft.
• Housing markets were viewed as “weak” in most districts, “characterized by reduced selling prices and low, but stable, sales activity.”
• Commercial real estate markets declined in most Districts
• Lending was contained with many Districts reporting reductions in residential, commercial and industrial lending and tighter lending standards.
• Labor market conditions were described as weakening and wage pressures were “subdued.”

About the only bit of good news in the report was that price pressures were reported to be “easing” with “some decreases in retail prices and declines in input prices, particularly energy, fuel, and many raw materials and food products.”

The Beige Book, formally “Summary of Commentary on Current Economic Conditions,” is a compilation of anecdotal reports from each of the 12 districts prepared about two weeks in advance of a Federal Open Market Committee meeting. The FOMC’s next scheduled meeting is December 15-16 (expanded from an originally scheduled one-day meeting). This report covered information received from the Federal Reserve districts through November 24. Historically, negative Beige Books correlate with a cut in the target Fed Funds rate by the FOMC. The FOMC instituted an emergency cut in the Fed Funds rate to 1.50% before the last Beige Book was issued and then cut the target rate again, to 1.00%, at its October 28-29 meeting.

The impact of the credit squeeze was apparent. “Credit standards rose across the nation,” the Beige Book report said, “with several districts noting increases in loan delinquencies and defaults, especially in the real estate sector.”

While credit conditions remained tight, Chicago reported recent FDIC actions and Federal Reserve lending had improved liquidity and slowed deposit outflows and Dallas indicated government capital investments have led larger institutions to feel less constrained in their lending, but some smaller banks reported :scrutiny from regulators was making new deals more difficult.”

There were some bright spots in the report. Reservations at a ski resort in the Richmond District were reported to be somewhat stronger for the Thanksgiving and Christmas holidays, and some tourism businesses in the Minneapolis District were cautiously optimistic for the winter season in part due to lower gasoline prices.

Another unexpected bit of strength came in the manufacturing sector. While all 12 districts said manufacturing conditions were weaker, a few sectors saw increased activity. Boston, Chicago, St. Louis and San Francisco noted stronger demand for aerospace manufacturers. St. Louis, Dallas and San Francisco reported increases in food processing.

One of the more discouraging reports though came from the labor sector with Boston, Richmond, Chicago and Dallas reporting weaker demand for temporary staff, Boston and Cleveland slower seasonal hiring, Atlanta reporting layoffs accelerated and hours declined and Dallas reporting “job cuts were particularly pronounced in the manufacturing sector.”

Reports from the districts with voting members of the Federal Open Market Committee (voting status of district presidents changes each year) were particularly severe.

In the New York district, Beige Book said, the economy “has deteriorated substantially since the last report,”  with manufacturers and other firms reporting widespread declines in business activity and employment levels. Retailers reported weak sales for October and early November and bankers reported “widespread weakening in loan demand across all segments, substantial tightening in credit standards, and higher delinquency rates on all types of loans.” 

Business conditions in the Philadelphia district were “generally weak in November” as manufacturers reported declines in shipments and new orders and retailers indicated while the pace of sales was steady during November it was down from the same month last year. The outlook among Philadelphia district businesses, the report said, “is generally not positive.”

Overall economic activity in the Cleveland district “weakened markedly since early October.” with a “drop in employment levels, primarily in manufacturing, residential construction, and auto dealerships.”

Minneapolis district economic activity also “contracted since the last report” with “decreased activity” in consumer spending and tourism, services, construction and real estate, manufacturing and mining.

And, there was “broad-based weakening” in the Dallas district economy in October and the first half of November. “While there were a few exceptions, most businesses reported declines in production and/or new orders” the report said and “both manufacturing and staffing services noted a particularly sharp reduction in activity.”

The Dallas district said though refiners have largely recovered from Hurricane Ike, and have operated in recent weeks at 87 percent capacity utilization, down only about 2 percentage points from the same time last year.