US economy begins 'to stabilise'

US retail spending remains weak

US economic activity has "begun to stabilise", according to the Federal Reserve's influential Beige Book.

The economy "continued to be weak going into the summer", the report said, highlighting sluggish retail activity and weak labour markets.

But the pace of decline moderated over the last month, it added.

The report failed to lift stock markets after earlier figures showed an unexpected fall in orders for US manufactured goods.

"Most districts indicated that the pace of decline has moderated since the last report or that activity has begun to stabilise, albeit at a low level," the report said.

Most districts indicated that labour markets remained "extremely soft", with wages being frozen or cut, it added.

The report also highlighted the fact there had been no improvement in bank lending.

This is despite massive injections of cash into the financial system by the US government.

On a more positive note, it reported that a number of districts had seen signs of improvement in the residential property market.

Earlier on Wednesday, official figures showed that orders for durable goods from US factories fell by 2.5%, a much bigger fall than had been expected.

The Beige Book, compiled eight times a year and used to help set interest rates, is based on a survey of business views from around the US.