What little optimism Ohio companies had for a year-end economic rally has vanished, thanks largely to Sept. 11, the Federal Reserve said Wednesday.

        The Fed's new survey of business conditions — commonly called the beige book — found that no area of the nation had been spared from the economic jolt caused by the terrorist attacks.

        “The softness in consumer spending, manufacturing and construction activity is affecting the labor market, where layoffs and plant closings have been reported in many industries from financial services on the East Coast to media and advertising on the West Coast to auto parts in the central states,” the Fed said.

        The report, compiled from information gathered by the central bank's 12 regional banks, will be used by the Fed's Open Market Committee when it meets Nov. 6 to decide interest rates.

        Cincinnati is part of the Federal Reserve Bank of Cleveland, which covers western Pennsylvania, eastern Kentucky, part of West Virginia and all of Ohio. What the beige book found in the Cleveland district:

        • Manufacturing: “Contraction in the manufacturing sector continues, but conditions vary widely by type of manufacturer. Suppliers to automakers reported significant drop-offs in new orders and production, as did steel makers, aerospace equipment producers, and printing and publishing firms. Manufacturers of niche products related to safety and security noted that business has increased substantially since September 11.”

        • Retail sales: “Retail sales for the first 10 days of September were sluggish. Retailers do not expect to recover the losses associated with the drastic drop-off in sales that occurred after September 11. ... Few retailers are optimistic about prospects for the holiday season and many expect fourth-quarter sales to be well below last year.”

        • Construction: “Residential building activity declined significantly the week after September 11, but since the third week of September it has returned to levels described by District homebuilders as normal.”

        Most economists say the attacks pushed the country into a recession. They predict that the central bank, which has already reduced the interest rates it controls to their lowest levels in almost four decades, will cut rates for a 10th time this year.

        Nationally, the Fed survey depicted an economy that came to a virtual standstill in the days immediately following Sept. 11 as air travel was suspended and Americans stayed home to watch television news reports.

        In fact, the survey said that in the week following the attacks, spending dropped sharply for all items “except those that were likely purchased in preparation for possible additional attacks.”

        The Fed found increased spending for groceries, security devices and bottled water. Purchases of insurance also rose.

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