Fed woe at 'lacklustre' economy

The economic picture is still cloudy

Worries over the Iraqi war kept the US economy "lacklustre" during March and April, the Federal Reserve has said.

The Fed's periodic anecdotal survey of the country's economic mood found that the US was still a long way from the sort of confidence needed for robust growth.

But it also warned that any forecasts would be highly uncertain in the present climate.

And a number of short-term or technical factors - notably this year's late Easter holiday, and atrocious weather on the US east coast - complicated the immediate picture.

Remaining optimistic

With consumer spending accounting for about two-thirds of US economic activity, the question of how much the war would affect consumer behaviour is seen as crucial to any recovery.

Many economists now feel that the underlying economy is robust, and even promising, but short-term shocks keep occurring.

The Fed said that "optimism remained" that the retail shopping environment would improve in the next six months.

But it cautioned that manufacturing remained weak in many areas, and that the labour market was "soft".