According to the FED’s latest Beige Book report, no major changes have been observed in economic activity across the country recently.
Private consumption fell slightly and employment levels remained roughly stable, but demand for labor weakened. Wages rose modestly in all regions, but prices continued to rise due to import costs, service spending, and tariffs.
Three of the Fed’s 12 districts reported a slight increase in economic activity, five reported no change, and four reported a slight slowdown. Although retail spending fell, strong demand for electric vehicles led to an increase in car sales in some regions.
Higher-income consumers increased spending on luxury travel and lodging, while lower- and middle-income households turned to discounts and promotions in the face of rising prices.
Manufacturing activity varies by region, with most regions reporting challenging conditions due to high tariffs and weak demand. Agricultural, energy, and transportation activities generally declined. Rate-sensitive sectors (particularly residential and commercial real estate) saw mixed signals, with credit demand increasing in some regions supported by low interest rates, while remaining stagnant in others.
Expectations for economic growth vary by region, according to the Fed’s report. While there was growing optimism in some regions, most said high uncertainty weighed on economic activity. A regional report said the potential for a prolonged government shutdown poses downside risks to growth.
Employment generally remained stable, but demand for labor decreased significantly. Lower demand, economic uncertainty, and increased investment in artificial intelligence have led many employers to implement layoffs and attrition reductions.
However, some employers reported that finding workers has become easier and they are shifting their focus to temporary and part-time workers rather than full-time workers. They noted that changes in immigration policy are creating labor supply difficulties, particularly in the agriculture, construction, manufacturing and tourism sectors.
Wages rose modestly to moderately in all regions. Significant increases in health insurance costs for employers in recent weeks have put pressure on labor costs.
Prices continued to rise nationwide. In addition to import costs, many regions are reporting accelerating increases in the costs of insurance, health care, and technical services. Although the input costs of tariffs were widely felt, the extent to which companies passed these increases onto final prices varied.
Some manufacturers and retailers held prices steady to maintain market share, while others passed all cost increases on to customers. The drop in demand has caused prices for raw materials such as steel and wood to fall in some regions.
*This is not investment advice.
