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"Weak, soft or subdued" economic activity at the end of July and throughout August has left the US economy facing stagflation, analysts have warned.
Experts say the findings of the latest beige book report from the Federal Reserve indicate the economy spent the summer in a rut, as consumer reined in their spending while higher prices for raw materials squeezed businesses.
In six of the Fed's 12 districts - including New York, Dallas, Boston and Atlanta - companies were forced to put up their prices because of rising input costs, potentially fuelling inflation.
At the same time, the New York Times said, nearly every district reported slowing or stagnant consumer outlay, as many US shoppers cut back on discretionary spending and instead turned to non-brand items and discount stores.
Officially, the Fed said the economy will probably continue to slow for the rest of 2008 - although it believes it will avoid the killer inflation and high prices last seen in the 1970s.
However, Lehman Brothers chief economist Ethan Harris said: "The Fed found a whole bunch of different adjectives to describe weakness in growth and a whole bunch of adjectives to describe price pressures ... what it's describing is basically stagflation."
Beige book reports are complied by the Federal Reserve's district banks based on anecdotal evidence of national economic conditions.
In Focus: Weak summer 'leaves economy facing stagflation'
"Weak, soft or subdued" economic activity at the end of July and throughout August has left the US economy facing stagflation, analysts have warned. Experts say the findings of the latest beige book report from the Federal Reserve indicate the economy spent the summer in a rut, as consumer reined in their spending while higher prices for raw materials squeezed businesses.
In six of the Fed's 12 districts - including New York, Dallas, Boston and Atlanta - companies were forced to put up their prices because of rising input costs, potentially fuelling inflation.
At the same time, the New York Times said, nearly every district reported slowing or stagnant consumer outlay, as many US shoppers cut back on discretionary spending and instead turned to non-brand items and discount stores.
Officially, the Fed said the economy will probably continue to slow for the rest of 2008 - although it believes it will avoid the killer inflation and high prices last seen in the 1970s.
However, Lehman Brothers chief economist Ethan Harris said: "The Fed found a whole bunch of different adjectives to describe weakness in growth and a whole bunch of adjectives to describe price pressures ... what it's describing is basically stagflation."
Beige book reports are complied by the Federal Reserve's district banks based on anecdotal evidence of national economic conditions.
