Some hope for weak economy

WASHINGTON (Reuters) -- U.S. economic conditions were weak or got worse through May, but some areas of the country saw signs the contraction was moderating, a Federal Reserve report said Wednesday.

Fed contacts in several regions said their expectations for the economy have improved, but they still don't expect much of an increase in economic activity in 2009.

The Fed's "Beige Book" of reports gathered from the 12 Fed districts showed widespread economic weakness with a few glimmers of hope.

The Fed has cut interest rates to near zero and pumped more than $1 trillion into the financial system to revive devastated financial markets and pull the economy out of a deep recession.

Despite aggressive Fed actions, labor markets remained weak with wages generally flat or falling and housing markets were still soft, the report said.

The Fed also said prices at all stages of production were flat or falling, with the "notable" exception ofoil prices.

0:00/3:53Behind oil's steady rise

However contacts reported some modest signs the pace of economic decline was easing.

"Some districts saw signs that job losses may be moderating," the report said.

Contacts in eight of the Fed's districts reported an uptick in home sales, citing the traditionally strong spring selling season, low interest rates and shrunken house prices.