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If it was not clear to some that the Federal Reserve needs to keep cutting interest rates to get this economy moving again, a survey report last week from the Fed itself should have settled the issue. Its so-called Beige Book, in which the 12 regional Fed banks have their staffs periodically take a snapshot of business conditions across, was bleak.

Instead of reporting various signs that the long-awaited economic recovery was actually under way, the Fed gave many examples of how things continue to get worse.

The Beige Book is prepared in advance of every meeting of the Fed’s policy-making Federal Open Market Committee, which decides whether to cut interest rates, hold them steady or raise them. A year ago, the Fed had just ended a long campaign of rate increases to slow the economy down, but this year has been aggressively cutting rates as the slowdown became too slow. At its last meeting, June 26-27, the Fed cut rates by just a quarter-point after a string of half-point cuts. When FOMC convenes Aug. 21, it should cut interest rates again, and should again signal that more rate cuts may be on the way. But the Fed should also recognize the severity of the economy’s weakness and pump up the money supply more aggressively than in June.

The latest report noted that “manufacturing activity in nearly all sectors and regions declined further in recent months as producers adjusted to weak domestic and foreign demand and worked through accumulated inventories.” That weakness for factory output, the Fed continued, “spilled over to other businesses, with many districts indicating declines in demand for office space and trucking and shipping services.”

Although the Fed also observed that the recent fall in fuel prices had allowed some truckers to curb or remove fuel surcharges, the overall thrust of its review was that the demand for goods was still very weak.

rders for back-to-school merchandise are even running below last year, while layoff announcements continue to pile up. Mexico and Japan see their economies sliding, which deprives U.S. firms of some export sales and makes domestic producers compete harder against low-cost imports.

ax refunds will help. Lower fuel prices will help. The delayed boost from past rate cuts will help.

But the goods-producing and goods-hauling economy is still very weak, and the Fed needs to step on the gas.

This editorial appears in the August 13 print edition of Transport Topics. Subscribe today.

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