Beige Book shows modest economic uptick while price pressures persist

The Federal Reserve’s Beige Book finds a modest pickup in U.S. economic activity, with eight of the 12 Federal Reserve Districts reporting slight to modest increases, three reporting no change and one reporting a modest decline. The pattern marks an improvement from recent Beige Book cycles that largely showed little change and sets a tentative backdrop for the Federal Open Market Committee as it meets later this month.

The survey, compiled from interviews and questionnaires with businesses, community groups and market contacts, paints a nuanced picture. Consumer spending rose overall but was concentrated among higher income households, which increased purchases of luxury goods, travel and experiences. Lower income households reported greater price sensitivity and hesitancy toward nonessential purchases, a divergence that highlights uneven demand across income groups and could complicate the Fed’s effort to judge broad-based momentum.

Manufacturing activity was mixed across districts. Some district write ups indicated growth in about five districts while six reported contraction or softness, and other districts described manufacturing as flat to slightly up. Auto sales were generally stagnant nationally, though a notable local exception occurred in New Hampshire where purchases of electric vehicles rose modestly ahead of impending tax credit expirations. Transportation and logistics contacts described stability to declines in shipments in several regions, with reduced appliance shipments linked to a slowdown in housing starts.

Residential real estate activity was softer on balance, with several districts reporting flat or declining home sales and rising inventories. Delays in mortgage processing in some areas were cited as a factor. Commercial real estate showed mixed signals, with modest increases in activity in some districts and stability in others, reflecting uneven demand for office, industrial and retail spaces.

Labor markets remained broadly steady. Hiring was reported as unchanged in many districts, with modest wage gains overall. At the same time, selective layoffs became more common in certain sectors even as aggregate employment held near recent levels. Banking contacts reported modest loan growth, driven largely by rising credit card balances, while volumes of auto and other consumer loans declined, pointing to uneven credit dynamics and continued consumer uncertainty.

Prices and input costs continued to rise at a modest to moderate pace across districts. Contacts cited tariff-related and other cost pressures as sources of upward pressure, even as headline inflation has slowed from its peaks. Energy demand was generally flat, although utilities saw pockets of robust activity tied to data center development and investment in liquefied natural gas, wind, solar and nuclear generation.

For policymakers, the Beige Book’s mix is consequential. The modest uptick in activity coupled with steady employment could argue for a cautious pause in further tightening, yet persistent price and cost pressures underline upside risks to inflation. Market participants may interpret the report as supportive of patience rather than an immediate pivot, leaving the FOMC engaged in a delicate balancing act between sustaining growth and securing lasting disinflation.

Longer term, the district-level disparities highlighted in the Beige Book — stronger spending among higher income households, softer housing markets and mixed manufacturing — suggest an uneven recovery that could influence regional investment, labor markets and policy trade offs in the months ahead.