Fed Beige Book: Overall economic activity increased at a slight/ moderate pace

Below is a summary of the Beige Book from a national ad regional perspective:

National Perspective

Overall Economic Activity

• Economic activity rose at a slight to moderate pace in 7 of 12 districts, while 5 districts reported flat or declining activity, an increase from four previously.

• Consumer spending increased slightly overall, but two districts reported declines, citing economic uncertainty, higher price sensitivity, and reduced spending by lower-income households.

• Retail traffic weakened in areas hit by winter storms, and one district noted immigration enforcement reduced demand in urban areas.

• Auto sales were generally lower, with affordability concerns cited as the primary driver.

• Manufacturing activity improved overall, with 8 districts reporting growth, supported by strong demand tied to data centers and energy infrastructure.

• Transportation activity was mixed, with three districts reporting contraction and two reporting modest growth.

• Financial services activity was stable to slightly higher, led by strength in commercial lending.

• Residential real estate and construction declined slightly, with low inventories and affordability challenges continuing.

• Nonresidential construction was mixed but slightly higher overall.

• Agricultural conditions were mostly flat, while energy activity increased modestly.

• Economic outlook remained cautiously optimistic, with most districts expecting slight to moderate growth ahead.

Labor Markets: Employment was generally stable, with most districts reporting little change in hiring as firms remained cautious due to economic uncertainty and rising costs. Wage growth remained modest to moderate, with continued pressure from higher benefits costs such as health insurance.

• Employment was generally stable, with 7 districts reporting no change in hiring.

• Hiring restraint was linked to rising input costs, softer demand, and economic uncertainty.

• Firms increasingly explored AI and automation primarily for productivity improvements rather than replacing workers.

• Wage growth remained modest to moderate, especially for skilled trades and specialized roles.

• Total compensation pressures persisted, particularly from rising health insurance premiums.

Prices: Prices increased at a moderate pace, driven largely by higher nonlabor input costs including insurance, utilities, energy, and raw materials. Tariffs were cited widely as a cost driver, though some firms held prices steady due to rising consumer price sensitivity.

• Prices rose moderately overall, with 8 districts reporting moderate increases and 4 reporting slight gains.

• Nonlabor input costs increased, including insurance, energy, utilities, metals, and raw materials.

• Tariffs were cited by 9 districts as contributing to higher costs.

• Some firms passed tariff-related costs to customers, while others absorbed costs due to growing price sensitivity among consumers.

• Price growth is expected to moderate somewhat in the coming months.

Regional Highlights by Federal Reserve District

Boston

• Economic activity flat; consumer spending unchanged.

• Employment edged lower; wages rose slightly.

• Prices increased modestly, with tariff pressures noted.

• Financial stress remained elevated for low-income households.

New York

• Economic activity declined modestly.

• Manufacturing improved slightly, while consumer spending rose modestly.

• Employment flat; wage growth modest.

• Consumers delaying major purchases due to uncertainty.

Philadelphia

• Economic activity grew modestly, improving from the prior report.

• Sales rose despite weather disruptions.

• Employment increased modestly.

• Price inflation eased slightly while wage growth remained modest.

• Lower- and middle-income households struggling with basic expenses.

Cleveland

• Business activity increased modestly.

• Manufacturing and commercial construction strengthened, partly due to data center development.

• Nonlabor costs remained elevated and selling prices rose moderately.

Richmond

• Regional economy expanded modestly.

• Retail spending flat; tourism spending slightly higher.

• Manufacturing and residential real estate declined.

• Commercial real estate strengthened moderately.

• Employment rose slightly; prices increased moderately.

Atlanta

• Economic activity grew modestly to moderately.

• Consumer spending and tourism increased.

• Housing demand improved; commercial real estate weakened.

• Transportation demand slightly lower; manufacturing slightly higher.

• Energy sector activity increased moderately.

Chicago

• Economic activity increased slightly.

• Manufacturing demand improved modestly.

• Consumer spending, construction, and real estate rose slightly.

• Employment and business spending were flat.

• Prices and wages rose moderately.

St. Louis

• Economic activity unchanged, but expected to increase in coming months.

• Employment steady.

• Wages and prices rose moderately.

• Business outlook cautiously optimistic.

Minneapolis

• Economic activity declined slightly.

• Employment softened; wage growth moderate.

• Consumer spending declined.

• Manufacturing and construction weakened.

• Agricultural conditions remained weak but stable.

Kansas City

• Economic activity increased slightly.

• Labor markets steady, with firms using technology to improve efficiency.

• Prices increased slightly.

• Energy activity rose modestly due to higher oil and gas prices.

Dallas

• Economic activity expanded moderately, led by manufacturing.

• Services growth modest.

• Retail sales, lending, and commercial real estate transactions increased.

• Energy activity declined; agriculture weakened.

• Employment rose slightly; wages and prices increased modestly to strongly.

San Francisco

• Economic activity contracted slightly.

• Employment stable overall but layoffs reported in tech services.

• Prices rose moderately; wages slightly.

• Retail and service activity weakened slightly.

• Contacts described a “bifurcated economy.”