While the U.S. economy continued to grow in late July and August, growth slowed in several regions as household spending softened, the Federal Reserve (search) said Wednesday.

Household spending weakened because of "lackluster retail sales and some cooling in new and existing home sales," the Fed said in the "beige book (search)," which offers an anecdotal look at the U.S. economy from the perspective of its 12 regional banks.

It also said while U.S. employment grew over the period, regional Fed banks reported "some unevenness" across industry sectors. It also noted high nonwage labor costs, such as health care and other benefits, continued to increase rapidly despite modest wage pressures.

The Fed said demand for consumer loans had softened somewhat, adding commercial loans demand had increased in several regions. It also said residential construction activity remained high though nonresidential construction was tepid.

Earlier Wednesday, Fed Chairman Alan Greenspan (search) said the U.S. economy appeared to be picking up steam after weathering a recent soft patch.

Greenspan said he was unconcerned about the impact of oil prices on inflation, but warned a congressional panel that high budget deficits could lead to "stagflation" — high inflation and low growth — as the country struggles to cope with a surge in retirees in coming years.