Page last updated at 21:29 GMT, Wednesday, 11 June 2008 22:29 UK

Most of the US 'sees weak growth'

Construction worker
The construction industry has been hit by the weak housing market

Much of the US saw weak economic growth in April and May while living costs increased, the Federal Reserve says in its closely monitored "Beige Book".

The US central bank's regular snapshot of business activity across the country describes weak consumer spending and job cuts linked to falling home sales.

The report knocked US shares, with the Dow Jones index of biggest shares down 206 points. The S&P 500 fell too.

Fed boss Ben Bernanke said earlier this week that risks to growth had faded.

The remarks were a strong signal that there would be no more US interest rate cuts.

Many analysts predict that US rates will remain at 2%, a four-year low, when policy makers next meet, and some believe they could even rise later in the year.

The Dow Jones index of largest shares ended 1.7% lower at 12,083.8, while the S&P 500 index dropped 1.7% and the technology-dominated Nasdaq fell more than 2%.

Price rises

The report appears to back Mr Bernanke's view that inflation risks will remain a problem due to higher energy and food costs.

"Business contacts in most districts reported increases in input prices since the last report, especially prices for energy, petroleum derivatives, metals, plastics, chemicals, and food," the report says.

But there are concerns that the price rises will derail the already fragile economy, which has been battered by problems in the banking sector and a housing slump.

Firms have been cutting jobs for months and the unemployment rate shot up to 5.5% from 5% in May - its fastest pace in more than two decades.

But on Monday, Mr Bernanke played down the unemployment figures, insisting that a series of reductions in interest rates in the last nine months, combined with tax rebates worth $168bn (85.6bn), would help to offset the risks threatening the economy.

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