The Fed's new snapshot of business conditions around the nation showed the economy continued to lose traction in the early fall, reflecting mounting damage as financial and credit problems worsened.
Economic activity weakened across all of the Fed's 12 regional districts, according to the report. Consumer spending - the lifeblood of the economy - slumped in most Fed regions. Manufacturing also slowed in most areas.
Some businesses had become more pessimistic about the economic outlook, the Fed said.
The survey was released shortly after Fed Chairman Ben Bernanke, in a speech in New York, warned that it would take time for the country's economic health to mend even if badly needed confidence in the U.S. financial system returns and roiled markets stabilize.