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Fed: Some Signs of Slower Economy

November 4, 1998

WASHINGTON (AP) _ The U.S. economy is being held back by the Asian crisis, but there are a number of pockets of strength, the Federal Reserve reported today. The national survey of business conditions left unanswered whether the central bank will cut interest rates later this month.

In a survey of business conditions compiled by its 12 regional banks, the Fed said the ``pace of economic expansion moderated in September and October amid signs of slowing in some sectors.″

The biggest development was a continued slowdown in manufacturing. Eleven of the 12 Fed regions reported a slowing of production activity blamed primarily on foreign economic turmoil, which has cut severely into U.S. exports.

But the Fed’s report was remarkably balanced, noting numerous offsetting signs of strength, ranging from stronger-than-expected retail sales in parts of the country to robust residential construction.

The central bank unexpectedly cut interest rates Oct. 15 for a second time in less than a month as Federal Reserve Chairman Alan Greenspan and other Fed officials expressed growing concerns about effects the global economic crisis would have on the U.S. economy.

That Fed rate cut has ignited a strong rally on Wall Street with investors believing the central bank will move aggressively to keep the U.S. economy out of recession.

While there had been a widespread belief the Fed would cut rates again at its next meeting on Nov. 17, economists are now not so certain, given recent reports showing the economy has not slowed as much as had been feared. The government on Friday said economic growth in the July-September quarter was a surprisingly resilient 3.3 percent.

Today, another report showed that orders to U.S. factories rose 0.4 percent in September, a gain that some economists said signaled a rebound in business spending on new equipment in coming months.

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