For example, the survey noted that in Dallas slight improvement could be found in residential real estate and staffing firms, while in New York, gains appeared mainly in manufacturing and retail. Improvement in manufacturing activity could also be found in Boston, Philadelphia, Cleveland and San Francisco.

The weakest sector was commercial real estate, with conditions described as either weak or deteriorating across all districts, the report said, lending further credence to concern that office buildings and shopping malls may be the source of next real estate bust.

Earlier this month a presentation by the Federal Reserve to bank regulators warned that U.S. banks were slow to recognize the severity of losses from loans tied to commercial properties -- just as they were with housing. Too few banks have set aside enough capital to cushion themselves against commercial real-estate losses should the bubble burst, Fed officials said.

The Beige Book also found banking weak in several districts, including Kansas City and San Francisco. It warned of continued erosion in credit quality that likely will worsen in the future.

One bright spot in the banking sector was lending to new homebuyers, in response to the first-time homebuyer tax credit. Part of the American Recovery & Reinvestment Act that became law in February, the program provides a tax credit of up to $8,000 to qualified buyers who purchase a home by Nov. 30. The program has been popular, and there have been calls to extend it.

On the jobs front, the survey found labor markets "were typically characterized as weak or mixed, but with occasional pockets of improvement." Adding to the gloomy employment picture were reports showing little, if any, increase in wages.

Prices overall were generally subdued across all districts, the Beige Book said, with the exception for increases in the price for steel in the Cleveland and Kansas City districts. The survey noted that prices for manufactured goods were flat to up slightly in Boston, with that district reporting that in some sectors "product competition and customer clout are leading to downward pressure on prices."

This latest edition of the Beige Book was compiled the Federal Reserve Bank of Richmond and was based on information from bank and branch directors combined with interviews of economists, market experts and key business contacts, prior to Oct. 21.