Economic growth across the US has slowed in recent weeks, with employment stalling and manufacturers becoming gloomier about the future, according to the Federal Reserve's regular survey of businesses.

The Fed's "beige book" assessment of grassroots economic conditions reveals a more pessimistic view of the US since the last survey at the end of July.

"Most districts reported slow and uneven economic growth, with mixed or scattered experiences across sectors of the economy," the report said. There was "little or no gain in employment in July and August".

The report comes the day before Mr Alan Greenspan, chairman of the Federal Reserve, testifies in front of the congressional budget committee. The Fed's beige book suggested that the main source of strength in the US economy robust consumption growth fuelled by a buoyant housing market might be easing off.

"The retail sales picture was mixed for the nation as a whole in July and August, with some districts posting declines in sales and others noting slight gains over 2001 levels," it said.

Car sales remained strong but that was largely due to aggressive financing and rebate incentives offered by dealers.

More optimistically, most of the country reported that sales and construction of residential housing was still strong, with the Minneapolis-St Paul area showing the highest number of sales for five years.

Economists say housing wealth has contributed a substantial part of the rise in consumption in recent years, implying a sharp drop-off if the housing market cools and prices decelerate. Mortgage lending remained strong but other credit growth was less so, the Fed's contacts reported, particularly business lending.

The manufacturing sector remained flat, with orders still to pick up for high-tech companies, which have suffered particularly badly in the economic slowdown. - (Financial Times Service)