The Fed's report shows continued downward pressure on the economy, with 10 of 12 districts reporting weaker conditions.
Philadelphia and Chicago were the exceptions, which reported regional economies that had "remained weak" but did not note a decline in economic activity. The deterioration was broad-based, with only a few sectors, such as basic food production and pharmaceuticals, appearing to escape the reduced demand affecting U.S. and global economies, the Fed said.
Outlook: Looking ahead, the Fed rated "the prospects for near-term improvement in economic conditions as poor, with a significant pickup not expected before late 2009 or early 2010."
Credit was tight, due to rigorous lending standards imposed by lenders. Consumer spending remained weak, but the Fed did note a slight firming in spending in many districts, after what it called "very disappointing" holiday season sales.
Concerning inflation, the Fed said price pressures continued to ease across a wide spectrum of final goods and service.
Job market conditions remained weak, with rising layoffs and hiring freezes, and unemployment rising in all areas -- which reduced or eliminated upward pressure on wages.
Manufacturing activity also fell, on a net basis, in every Fed District. One bright spot: bio-pharmaceutical firms.
Real estate remained in a slump in most areas, "with only scattered, very tentative signs of stabilization reported," the Fed said.
Economic Analysis: Another decidedly somber assessment of the U.S. economy from the Fed. Outside of the biotech sector and the retail grocery business, there was almost no evidence of the recession reaching a bottom. The U.S. economy remains weak, in nearly every sector, and across the U.S., with credit conditions still constrained.
The tone of the report gives readers the impression that the Fed does not expect the recovery to start until 2010. The Fed did not explicitly state that, but one gets the sense the Fed would be very pleasantly surprised if it saw signs of a recovery in Q3 / Q4 2009.
Bottom Line: The recession continues, and it's full speed ahead with quantitative easing and other measures (including mortgage relief and legislative action) to provide large stimulus to the U.S. economy. It's going to need it.