The U.S. economy continued to grow in the final weeks of the fourth quarter but the pace of activity slackened amid subdued holiday spending and a weak housing sector, the Federal Reserve said on Wednesday.

Reports from the 12 Federal Reserve districts suggest that economic activity increased modestly during the survey period of mid-November through December, but at a slower pace compared with the previous survey period, the Fed said in the regular release of its Beige Book survey of economic conditions.

This survey, based on anecdotal reports from the 12 Fed districts, was prepared by the Federal Reserve Bank of Atlanta and based on information collected before January 7.

Most reports on retail activity indicated subdued holiday spending and further weakness in auto sales. However, most reports on tourism spending were positive, the Beige Book said, adding that housing continued to be soft nationally.

Foreigners have flocked to shopping meccas like New York to take advantage of the weaker dollar, which makes U.S. goods cheaper, and the Fed noted export orders had increased, while industries that compete with imports were also doing better.

The Chicago Fed reported that domestic steel production was expanding, led by a moderation in imports, the Fed said.

External demand is one of the sources of growth that U.S. officials hope can offset some of the housing slump.

U.S. growth has been hit by sliding house prices and a credit crunch that could tip the economy into recession. But the Beige Book made plain there were also inflation pressures, although it played down the risks from wages.

Wage increases remain moderate overall. Increases in prices for food, petrochemicals, metals and energy-related inputs continued to be widely reported, and production and delivery costs for many products increased because of higher fuel prices, the Fed said.

Highlighting the weakness in residential construction, the Beige Book also noted that this softness had spread somewhat to the commercial real estate sector, although demand for nonfinancial services was holding up.

(Reporting by Alister Bull and David Lawder; editing by Neil Stempleman)

Inflation