Fed's Beige Book: Economy Weak Throughout US

Economic activity weakened across the United States in September as businesses rethought capital investments, consumers curtailed spending and the general outlook darkened, the Federal Reserve said Wednesday.

"Economic activity weakened in September across all twelve Federal Reserve Districts,'' the Fed said in its Beige Book report on the state of the economy through Oct. 6.

• Fed Faces Pressure to Cut Rates Again

The Fed said retailers were seeing consumers pull back some spending while businesses were anxious about the future economic outlook, and that weighed on their capital spending decisions.

"Several districts reported that capital spending decisions were being influenced by economic uncertainty," read the anecdotal report that the Fed uses to help it shape monetary policy.

Markets widely expect the Fed to trim interest rates by a quarter percentage point at the next scheduled meeting of October 28th and 29th in the face of a wrenching credit crunch and broader economic woes.

"Credit conditions were characterized as being tight" across the country, the report stated.

Inflationary pressures moderated a bit in September, the Fed said, while labor market conditions weakened in most areas.

The report had a bright spot for agriculture and reported "conditions remained favorable" in most districts.

Reports on natural resources were also upbeat, the report said.

The report came shortly after Fed Chairman Ben Bernanke said turmoil in credit markets poses a "significant threat'' to an already slowing U.S. economy.

In a speech to the Economic Club of New York, Bernanke said it will take some time to restore normal flows of credit and he pledged the U.S. central bank would continue to act aggressively to fight the crisis.

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