Highlights
The Fed's Beige Book pointed to somewhat stronger conditions overall across the 12 district banks, although the improvements were uneven. Where growth was present it was generally termed slight (Boston and Cleveland) or modest (Philadelphia, Richmond, Chicago, and Dallas). Economic activity was flat in two districts (St. Louis and Kansas City). Activity was down slightly in four districts (New York, Atlanta, Minneapolis, and San Francisco). With only half of the districts reporting growth, the Beige Book remains consistent with weak conditions.
However, the share of districts reporting at least some growth is the highest since January. Regional economies appear to be finding their way through the shifting sands of trade and tariff policy announcements out of the White House.
The Beige Book noted, Across Districts, contacts reported flat to declining consumer spending because, for many households, wages were failing to keep up with rising prices. Contacts frequently cited economic uncertainty and tariffs as negative factors. This is worrisome for economic growth going into the fall months and the winter holiday shopping season. The report also said, Manufacturing firms reported shifting to local supply chains where feasible and often using automation to cut costs. This does not bode well for the job market in some sectors.
The Beige Book said, Eleven Districts described little or no net change in overall employment levels, while one District described a modest decline. Seven Districts noted that firms were hesitant to hire workers because of weaker demand or uncertainty. Moreover, contacts in two Districts reported an increase in layoffs, while contacts in multiple Districts reported reducing headcounts through attritionencouraged, at times, by return-to-office policies and facilitated, at times, by greater automation, including new AI tools. The consequent increase in workers looking for jobs is noted, but also that half of the Districts noted that contacts reported a reduction in the availability of immigrant labor, with New York, Richmond, St. Louis, and San Francisco highlighting its impact on the construction industry.
The pace of wage increases is moderating, but overall where businesses are hiring, wages are going up. The report said, Half of the Districts described modest growth in wages, while most of the others reported moderate growth. Two Districts noted little or no change in wages.
There are indications of tariff-related price pressures in the report. The report said, Ten Districts characterized price growth as moderate or modest. The other two Districts described strong input price growth that outpaced moderate or modest selling price growth. Nearly all Districts noted tariff-related price increases, with contacts from many Districts reporting that tariffs were especially impactful on the prices of inputs. Tariffs are not the only source of upward price pressures. Contacts in multiple Districts also reported rising prices for insurance, utilities, and technology services. Pass-through of these cost increase to customers are restrained by, hesitancy in raising prices, citing customer price sensitivity, lack of pricing power, and fear of losing business. In some cases, as highlighted by Cleveland and Minneapolis, firms reported being under pressure to lower prices because of competition, despite facing increased input costs. Most Districts reported that their firms were expecting price increases to continue in the months ahead, with three of those Districts noting that the pace of price increases was expected to rise further.
When the FOMC next meets on September 16-17, it will have to balance the small positives in current conditions for the economy and employment against clear sources of inflation and elevated inflation expectations. The softening of the labor market may counsel cutting the fed funds target rate from the 4.25-4.50 percent that has been in place since December 2024. However, the full impact of price changes related to tariffs has not yet been felt whether as a one-off as businesses adjust or as rippling out into more persistent inflation conditions.
However, the share of districts reporting at least some growth is the highest since January. Regional economies appear to be finding their way through the shifting sands of trade and tariff policy announcements out of the White House.
The Beige Book noted, Across Districts, contacts reported flat to declining consumer spending because, for many households, wages were failing to keep up with rising prices. Contacts frequently cited economic uncertainty and tariffs as negative factors. This is worrisome for economic growth going into the fall months and the winter holiday shopping season. The report also said, Manufacturing firms reported shifting to local supply chains where feasible and often using automation to cut costs. This does not bode well for the job market in some sectors.
The Beige Book said, Eleven Districts described little or no net change in overall employment levels, while one District described a modest decline. Seven Districts noted that firms were hesitant to hire workers because of weaker demand or uncertainty. Moreover, contacts in two Districts reported an increase in layoffs, while contacts in multiple Districts reported reducing headcounts through attritionencouraged, at times, by return-to-office policies and facilitated, at times, by greater automation, including new AI tools. The consequent increase in workers looking for jobs is noted, but also that half of the Districts noted that contacts reported a reduction in the availability of immigrant labor, with New York, Richmond, St. Louis, and San Francisco highlighting its impact on the construction industry.
The pace of wage increases is moderating, but overall where businesses are hiring, wages are going up. The report said, Half of the Districts described modest growth in wages, while most of the others reported moderate growth. Two Districts noted little or no change in wages.
There are indications of tariff-related price pressures in the report. The report said, Ten Districts characterized price growth as moderate or modest. The other two Districts described strong input price growth that outpaced moderate or modest selling price growth. Nearly all Districts noted tariff-related price increases, with contacts from many Districts reporting that tariffs were especially impactful on the prices of inputs. Tariffs are not the only source of upward price pressures. Contacts in multiple Districts also reported rising prices for insurance, utilities, and technology services. Pass-through of these cost increase to customers are restrained by, hesitancy in raising prices, citing customer price sensitivity, lack of pricing power, and fear of losing business. In some cases, as highlighted by Cleveland and Minneapolis, firms reported being under pressure to lower prices because of competition, despite facing increased input costs. Most Districts reported that their firms were expecting price increases to continue in the months ahead, with three of those Districts noting that the pace of price increases was expected to rise further.
When the FOMC next meets on September 16-17, it will have to balance the small positives in current conditions for the economy and employment against clear sources of inflation and elevated inflation expectations. The softening of the labor market may counsel cutting the fed funds target rate from the 4.25-4.50 percent that has been in place since December 2024. However, the full impact of price changes related to tariffs has not yet been felt whether as a one-off as businesses adjust or as rippling out into more persistent inflation conditions.
Definition
This book is produced roughly two weeks before the monetary policy meetings of the Federal Open Market Committee. On each occasion, a different Fed district bank compiles anecdotal evidence on economic conditions from each of the 12 Federal Reserve districts.
Description
This report on economic conditions is used at FOMC meetings, where the Fed sets interest rate policy. These meetings occur roughly every six weeks and are the single most influential event for the markets. Market participants speculate for weeks in advance about the possibility of an interest rate change that could be announced upon the end of these meetings. If the outcome is different from expectations, the impact on the markets can be dramatic and far-reaching.
If the Beige Book portrays an overheating economy or inflationary pressures, the Fed may be more inclined to raise interest rates in order to moderate the economic pace. Conversely, if the Beige Book portrays economic difficulties or recessionary conditions, the Fed may see the need to lower interest rates in order to stimulate activity. Since the past recession, traders worry about the impact of the Beige Book on the timing of tapering quantitative easing.
Since the Beige Book is released two weeks before each FOMC meeting, investors can see for themselves at least one of the many indicators which Fed officials will use to determine interest rate policy, and can position their portfolios accordingly.
Frequency
Eight times a year
If the Beige Book portrays an overheating economy or inflationary pressures, the Fed may be more inclined to raise interest rates in order to moderate the economic pace. Conversely, if the Beige Book portrays economic difficulties or recessionary conditions, the Fed may see the need to lower interest rates in order to stimulate activity. Since the past recession, traders worry about the impact of the Beige Book on the timing of tapering quantitative easing.
Since the Beige Book is released two weeks before each FOMC meeting, investors can see for themselves at least one of the many indicators which Fed officials will use to determine interest rate policy, and can position their portfolios accordingly.
Frequency
Eight times a year
