According to the FED's latest Beige Book report, no significant change has been observed in economic activities across the country recently.
Consumer spending declined slightly, employment levels remained largely stable, but labor demand weakened. Wages rose modestly across all regions, but prices continued to rise due to import costs, spending on services, 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 weakening. While retail spending declined, some districts saw increased car sales due to strong demand for electric vehicles.
While high-income consumers increased their spending on luxury travel and accommodation, middle- and low-income households turned to discounts and promotions in the face of rising prices.
Manufacturing activity varied by region, with most regions reporting challenging conditions due to high tariffs and weak demand. Agricultural, energy, and transportation activity experienced a general decline. Interest-sensitive sectors (especially residential and commercial real estate) showed mixed signals: some regions saw increased credit demand, supported by low interest rates, while others remained stagnant.
According to the Fed report, economic growth expectations vary by region. While optimism has increased in some regions, most noted that high uncertainty continues to weigh on economic activity. One regional report noted that a potential prolonged government shutdown poses a downside risk to growth.
While employment remained generally stable, there was a significant weakening in labor demand. Many employers implemented layoffs or reduced staffing through natural attrition due to falling demand, economic uncertainty, and increased investment in artificial intelligence.
However, some employers reported that finding workers had become easier and that they were shifting their focus to temporary or part-time workers rather than full-time. They noted that changes in immigration policies were causing labor supply difficulties, particularly in the agriculture, construction, manufacturing, and tourism sectors.
Wages increased modestly to moderately across all regions. A significant increase in employer health insurance costs in recent weeks has put pressure on labor costs.
Prices continued to rise nationwide. Many regions reported accelerating increases in the cost of insurance, healthcare, and technology services, along with import costs. While input costs from customs duties were widely felt, the extent to which firms passed these increases onto final prices varied.
While some manufacturers and retailers held their prices steady to maintain market share, others passed on cost increases entirely to customers. Prices for raw materials like steel and lumber have fallen in some regions due to falling demand.