The economic outlook grew dimmer in September, leading businesses to be wary of spending and of building up inventories ahead of the holiday sales season, the Federal Reserve said on Wednesday.

Overall economic activity continued to expand in September, although many districts described the pace of growth as 'modest' or 'slight' and contacts generally noted weaker or less certain outlooks for business conditions, the findings compiled by the regional Fed Bank of Chicago said.

U.S. stocks fell after the Fed's beige book was released, while Treasury debt prices rose on the Fed's glum economic outlook.

The survey was based on information collected on or before October 7 and covers coast-to-coast conditions in all 12 regional Fed districts. It is based on the banks' contacts with businesses and other groups in their regions.

It found that consumer spending was up slightly in most districts, led by auto sales and tourism. There was also some increase in business spending, notably for construction and mining equipment and for new-car inventories.

Although a few districts saw some pickup in construction, overall conditions for both residential and commercial real estate remained weak, the survey said. Loan demand was generally weaker except for mortgage refinancing.

Dana Saporta, an economist with Credit Suisse in New York, said it was not a survey that signaled any robust rebound for the economy.

There are some pockets of encouraging news like firmer consumer and business spending. But what permeates in the headlines is that there seems to be this continued uncertainty and doubt, Saporta said.

Businesses were more cautious in the face of a more uncertain economic outlook that the survey said was weighing on future spending plans.

Philadelphia, Richmond and Chicago indicated that many retailers were reluctant to build inventories ahead of the holiday season, pointing to recent declines in consumer confidence, the survey said.

The traditional holiday sales season from Thanksgiving through Christmas accounts for half or more of many retail stores annual business so a reluctance to build inventories may signal their concern that consumers aren't in the mood to spend.

Wage pressures were described as subdued and several districts said prices for commodities, including oil and industrial metals, had fallen in September.

At the retail level there was some hesitation to boost prices when demand was weak but, nonetheless, there was increased pass-through of costs for food and cotton-based goods to consumers.

(Reporting by Glenn Somerville, Editing by Andrea Ricci)