The Federal Reserve’s latest Beige Book, released today, indicates that economic activity expanded at a slight to moderate pace across most Federal Reserve districts, supported by continued strength in manufacturing, stable banking conditions and modest gains in several service sectors. The report noted that manufacturing activity increased in nine of the twelve districts, while employment remained largely unchanged in what many contacts described as a “low-hire, low-fire” labor market.
The Beige Book highlighted growing divergence in consumer spending patterns across income groups. Higher-income households generally remained resilient despite rising prices, while middle-income consumers were described as increasingly cautious with discretionary purchases and focused on stretching household budgets. Lower-income households continued to face greater financial pressures, contributing to mixed retail activity and increased demand for necessities.
The Federal Reserve’s report also pointed to rising energy-related costs as a significant source of inflationary pressure. Contacts across multiple districts cited higher fuel, shipping, packaging and fertilizer expenses linked to ongoing tensions in the Middle East. While wage growth remained modest to moderate, businesses reported that nonlabor input costs continued to rise faster than selling prices, creating concerns about margin compression and contributing to uncertainty about the economic outlook over the next six months.
According to the report, the economic outlook remains uncertain, with contacts expressing caution about the pace of growth amid persistent cost pressures. The Beige Book, which is based on anecdotal information collected by the Federal Reserve Banks, serves as a key input for policymakers ahead of the Federal Open Market Committee meetings. The full report is available on the Federal Reserve’s website.
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