The Federal Reserve’s latest Beige Book said U.S. economic activity improved at a slight to moderate pace from late May through June, with 11 of the 12 Federal Reserve districts reporting growth.
Released Wednesday, the report offered a picture of an economy that continued to expand in recent weeks while employment levels in most districts changed little or barely moved. The Beige Book was based on information gathered by the Fed’s 12 regional reserve banks through July 6 and was compiled by the Federal Reserve Bank of Chicago.
Growth improved from the prior survey period
According to the report, economic activity in 11 districts increased slightly to moderately, while the San Francisco district showed no change.
That marked a somewhat firmer reading than the previous Beige Book released in June, when 10 districts reported expansion, one was unchanged, and one saw a decline.
Prices continued to rise, but inflation expectations diverged
Overall prices increased at a moderate pace. Nine districts reported moderate price growth, two reported strong price growth, and one reported slight price growth. Compared with the prior reporting period, price growth in all districts was either unchanged or slower.
The Fed wrote, "Some business contacts attributed these cost increases to conflict in the Middle East; others mentioned tariffs. Consumer prices continued to increase, and a few districts said business contacts noticed that their customers had become more sensitive to prices."
On the inflation outlook, the report said views differed across districts because the Middle East situation had added volatility to energy prices. Some contacts expect inflation to hold at its current pace in the coming months, while others expect it to cool, due in part to lower fuel prices.
The report said, "Expectations for price growth over the next several months varied across districts, with some district contacts expecting inflation to continue at its current pace and others expecting inflation to moderate, in part because of declining fuel prices."
It also said contacts generally expect economic activity to keep expanding in the months ahead, though several districts pointed to rising uncertainty around the outlook for fuel costs.
In the weeks leading up to the report, gasoline prices had eased, and the monthly inflation rate for June declined. The source text also noted that a temporary peace agreement between the United States and Iran briefly relieved pressure on household energy costs before renewed hostilities sent oil prices higher again.
Labor market remained steady
Employment and wages both increased at a slight to moderate pace. Employment rose slightly, moderately, or steadily in five districts, while seven districts reported little to no change. In the previous report, only one district had posted slight, moderate, or steady job growth.
Hiring increased across several sectors, including manufacturing, construction, and retail. The report said employers across industries continued to have difficulty finding skilled workers, especially technicians and tradespeople. Wage growth was limited in most districts, and in two districts it was described as small. Some of the wage pressure came from stronger competition for technical workers.
District-by-district details
Boston
Manufacturing firms reported a small increase in headcount, while retailers and hotels said seasonal hiring ran above last summer’s level. Employment in services was broadly stable, though one company made small layoffs of white-collar staff after AI improved efficiency.
New York
Tourism in New York City stayed strong, helped by visitors tied to the FIFA World Cup. Hotel occupancy and room rates increased, and some restaurants and bars posted strong sales on match-viewing demand. International air passenger traffic, which had been soft in the spring, also recovered.
Philadelphia
Respondents said activity tied to data centers, artificial intelligence, and defense manufacturing continued to post strong growth.
Cleveland
Real estate developers said demand for affordable housing increased, while high-end housing demand remained strong.
Richmond
Port trade activity returned to a moderate growth pace after slowing in previous periods.
Atlanta
Transportation demand grew moderately. A truck brokerage said industry conditions were improving steadily as excess capacity built during the pandemic was gradually absorbed, with shipping volumes surpassing year-earlier levels for the first time since 2021.
Chicago
Contacts said stronger retail promotions lifted consumer spending, partly because Amazon Prime Day and competing sales events were pulled forward into June rather than the usual July timing.
St. Louis
Respondents generally expect businesses to keep passing higher costs on to consumers over the next several months.
Minneapolis
Multiple respondents said higher gasoline prices were weighing on overall consumer spending. They also said consumers were shifting from cash and debit cards to credit cards, and that credit card fees were squeezing business margins further, especially for small businesses.
Kansas City
Employers said they were willing to train job candidates who lacked technical skills, but found it harder to hire people missing soft skills such as communication and collaboration.
Dallas
A human resources firm said hiring demand was increasing across industries and skill levels. One respondent said June was the best month since before the pandemic.
San Francisco
Price-sensitive consumers continued to trade down to cheaper alternatives. One respondent in Southern California said in-store shoppers were not only buying fewer high-priced food items, but were also cutting the number of goods they purchased.
The piece was written by Yang Chen and credited to Wallstreetcn in the source text.