The Federal Reserve's Beige Book released Wednesday showed moderate economic growth in the U.S. over the past two months, with particularly strong demand for data centers. While high-end consumer spending remained solid, price sensitivity limited firms' ability to pass on cost increases. Employment rose modestly but unevenly, with healthy demand in manufacturing, construction, and some services, while retail and hospitality saw declines. Manufacturing activity was boosted by defense and data center orders. The report mentioned artificial intelligence 19 times and data centers 25 times, highlighting their prominence in the economic landscape.
The Federal Reserve's Beige Book, released on Wednesday, indicated that U.S. economic activity grew at a moderate pace over the past two months, with data center demand standing out as a key driver. The Fed described the outlook as "positive," though uncertainty from energy prices and geopolitical factors led to diverging confidence across sectors.
On the consumer side, high-end spending remained solid, but consumers have become more price-sensitive. Contacts in several districts noted that heightened price sensitivity is limiting businesses' ability to pass on higher input costs to consumers. At the same time, prices across most Fed districts rose at a modestly faster pace.
Employment levels edged up nationally, but labor demand varied. The report said healthy demand for labor remained common in manufacturing, construction, and some services, while retail and hospitality saw weaker demand.
Manufacturing activity increased in most Fed districts, driven largely by defense and data center orders. The report's frequency of mentions underscores the outsized role of these two investment categories: artificial intelligence was cited 19 times, and data centers 25 times.
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