San Francisco Fed Says Regional Economy on Hold in 1st Quarter

The San Francisco Federal Reserve Bank said Thursday that the regional economy “hit the pause button” in the first three months of the year as consumers and businesses reined in spending in the lead-up to war with Iraq.

Issuing its quarterly economic update, the San Francisco Fed said consumer purchases had slowed “especially on non-discounted merchandise” and that sentiment has declined steadily.

The report from the regional Fed bank -- whose district covers nine Western states, including California, and makes up nearly a fifth of national gross domestic product -- also cautioned that the states’ budget problems pose “significant challenges.”

“Consumers and businesses in the West hit the pause button in recent months, responding to the sluggish economic recovery and uncertainties related to geopolitical developments,” the report said.

Profits for retailers remain squeezed as they respond to picky consumers, “offering near continuous sales, rebates, financing incentives and price guarantees.”