Despite weaknesses in parts of the housing and retail sectors, the economy in the Federal Reserve's Fourth District, which includes Western Pennsylvania, Ohio and parts of Kentucky and West Virginia, improved slightly in the early summer.

According to the Fed's periodic survey of regional banks, known as the "Beige Book," which was released yesterday, the regional housing industry remains weak, with no improvement expected for the remainder of the year.

Home builders reported flat to declining sales, and half of the respondents to the survey said they had reduced the list prices on new homes. They also reported price increases for concrete, shingles, metal products and fuel, although lumber prices reportedly were stable to declining.

On the other hand, most commercial builders reported that business was expanding.

Bankers in the district reported that home mortgage origination was slow, with lending standards remaining very tight for the foreseeable future.

Higher costs for food and gasoline appear to be taking their toll. Grocery store managers reported that sales were flat to declining. Auto dealers also reported that purchases of new and used cars were flat to down, the exception being fuel-efficient cars, which are "selling well." Purchases of SUVs and trucks were characterized as poor.

Overall consumer spending was reported as sluggish or slowing in nearly all districts. The Fourth District was an exception to the trend, characterizing sales as stable to improving, outside of the grocery sector.

Regional output by factories was largely stable during the past six weeks with manufacturers expecting a slowdown in orders during the upcoming months. Manufacturing activity declined in many other Fed Districts.

Employment levels in the Fourth District were largely unchanged with the most job vacancies reported in health care, energy, steel and chemicals.

The survey is based on information supplied by the Fed's 12 regional banks collected on or before July 14. Overall, the pace of economic activity has slowed since the last report.