Post-war US economy sluggish

The sluggish US economy is showing a few signs of life.

But the post war bounce has not been as dramatic as some observers had hoped for.

That is the message from the Federal Reserve's Beige Book, a regular anecdotal summary of economic conditions around the country.

Consumer spending and the service sector in general remain lacklustre, according to the report.

War concerns

The labour market also remains weak, while manufacturing is described as "mixed".

None of the 12 Fed districts said conditions were getting worse, however, adding up to a more upbeat assessment than that contained in the previous Beige Book in April.

"The unwinding of war-related concerns appears to have provided some lift to business and consumer confidence, but most reports suggest that the effect has not been dramatic," the central bank said.

But it warned against reading too much into the scattered signs of a rebound.

It described overall activity in many districts as still "sluggish, subpar or subdued."

Recession fears

The Beige Book will be used when the Federal Open Markets Committee (FOMC) meets on 24 and 25 June to set interest rates.

Many analysts believe the Fed will cut interest rates - already at a 41-year low 0f 1.25% - in a fresh effort to prevent the US economy sliding into recession.

Fed chairman Alan Greenspan recently said he would do whatever is necessary to guard against the prospect of falling prices.

America has not been hit by a period of deflation since the Great Depression of the 1930s.

However, the fact that Greenspan has even talked about the threat of deflation, however remote, has been seen as a sign the Fed is ready to keep rates low for some time to come.