Half of Federal Reserve districts saw evidence the U.S. economy had improved by the end of August, although labor markets remained weak and retail sales were flat overall, a Fed report said on Wednesday.

Dallas, Boston, Cleveland, Philadelphia, Richmond and San Francisco noted gains. Other areas reported the economy was stable or showing signs of stabilization while St. Louis reported that the pace of economic decline appeared to be moderating.

Most districts noted that the outlook for economic activity among their business contacts remained cautiously positive, the Fed's Beige Book survey said.

The modestly upbeat report said most regions reported some improvement in hard-hit residential real estate markets and an uptick in manufacturing.

Tempering those developments, Fed contacts reported that demand for commercial property remained weak and that businesspeople in some areas believed recently higher vehicle sales levels were likely not sustainable after the government's cash for clunkers incentive program lapses.

(Reporting by Mark Felsenthal; Editing by Andrea Ricci)

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