A report on economic activity around the nation in June and July issued by the Federal Reserve Wednesday offered few bright spots. Retail sales remain sluggish, the Fed said, with discounters outperforming other stores and many having to slash prices to move merchandise. Stores in some regions said they were limiting back-to-school and Christmas orders in anticipation of weaker demand than last year. Manufacturing continues to be the economy`s weakest link. And, according to the Fed, a sickly factory sector is spilling over to other service areas, commercial real estate and trucking. Stable or growing residential real estate markets, inventory reductions and tame inflation offered the best hope for a recovery. Labor markets have slackened, which is helping to contain wage pressures. Softer energy prices are also helping to keep inflation under wraps. Bank loan demand was flat or down in most regions in the past few weeks, the Fed said.
