The Beige Book report published by the FED gave important signals about the economic outlook across the country.
The report found that prices rose modestly in most regions, while employment levels remained generally stable. Business confidence varied across regions.
Ten of the Fed’s 12 districts described price increases as “moderate” or “medium,” while two districts reported that input costs exceeded the increase in selling prices.
Input prices have reportedly risen, particularly due to customs duties. Price increases are also reportedly continuing in insurance, energy, and technology services. While some businesses are passing these costs on to consumers, most regions have shown a tendency to limit price increases.
The Cleveland and Minneapolis regions noted that businesses have been forced to reduce prices due to competitive pressures despite rising costs. While prices are expected to continue to rise in the coming months, the three regions noted that this increase could accelerate.
On the employment front, 11 regions reported “generally stable” or “little change,” while one region saw a slight decline. It was noted that companies were being cautious in hiring due to weak demand and economic uncertainty, while layoffs and natural staff reductions increased in some regions. The use of artificial intelligence and automation technologies has also accelerated the trend of staff reductions. Meanwhile, the decreasing supply of migrant workers was noted to be particularly problematic in the construction sector. Wages, however, continued to rise moderately in most regions.
The New York Federal Reserve reported that consumers are under pressure due to rising insurance, energy, and other living expenses. While the retail and hospitality sectors attempted to offset the weakening consumer sentiment with discount campaigns, the decline in international tourism demand was not offset. Although automotive sales remained flat, demand for spare parts and repairs increased. In the manufacturing sector, a shift to local supply chains and a shift towards automation to reduce costs were prominent.
The Federal Reserve branches in Philadelphia, Cleveland, and Chicago noted a significant increase in data center construction due to the rise in artificial intelligence applications. In Atlanta and Kansas City, data centers were reported to be increasing energy demand. Overall, business confidence varied across regions, with many businesses reportedly uncertain about the economic outlook.
*This is not investment advice.