Fed says economy slowing

WASHINGTON -- The economy logged slower growth in the early fall as troubles in the housing and credit markets weighed on companies and individuals alike, the Federal Reserve reported Wednesday.

The Fed's fresh snapshot showed that business activity around the country was more subdued, but the report didn't suggest that such activity is in danger of collapsing.

"Economic activity continued to expand in all districts in September and early October but the pace of growth decelerated since August," the Fed survey said.

Spending by individuals was uneven and suggests growth was slower in the early fall, the Fed said. "The manufacturing and service sectors continued to expand, but growth weakened -- mostly for products and services related to home construction and real-estate transactions," the Fed observed.

To keep the economy expanding, it is vital that companies and people spend and invest at a sufficient pace. The big worry has been that they'll cut back sharply, sending the economy into a tailspin.

The Fed report detected that businesses feel more unsure about the economy's prospects.

"Contacts in a number of industries indicated a higher-than-usual degree of uncertainty about the outlook for economic activity," the Fed survey found.

"Many real-estate contacts expect housing markets to remain subdued for several months," the Fed said. "At firms without direct ties to real estate and construction, contacts are still wary that credit tightening and slowing construction might slow activity in their industry, but there is cautious optimism because few see much evidence of such spillovers at this time."

Federal Reserve Chairman Ben Bernanke, in remarks earlier this week, warned the housing slump will be a "significant drag" on economic growth into next year.

Yet, for all the problems the country has had to cope with, the economic performance so far this year "has been reasonably good," Bernanke said.

The ultimate implications of the credit crunch on the broader economy, however, remain "uncertain," the Fed chief said.