U.S. economic activity slowed in August, with nine of the Federal Reserve's 12 districts reporting flat or declining performance, according to the Fed's latest Beige Book report.
The Wednesday report, based on anecdotal information from local businesses and contacts, highlights weakening consumer spending, flat employment growth and continued caution from businesses regarding hiring and expansion, despite some easing of inflationary pressures and wage growth.
Elevated interest rates and economic uncertainty continue to weigh further on sectors like manufacturing and real estate.
Key Insights From August Fed Beige Book
- Activity weakens: The number of Federal Reserve Districts reporting flat or declining economic activity has risen from five to nine, signaling growing concerns about economic deceleration.
- Stable labor market: Employment levels remained generally stable, but firms are becoming more selective in hiring and, in some cases, reducing hours or relying on attrition. Yet, overall layoffs remained rare.
- Consumer spending down: Consumer spending ticked down across most Federal Reserve Districts, a shift from the prior report where spending remained steady. Auto sales continued to show variation by region, with elevated interest rates and high vehicle prices dampening sales in several areas.
- Mixed housing market: While residential and commercial real estate activity was mixed, reports leaned toward softer home sales and flat commercial development.
- Price pressures easing: Prices continued to rise modestly, though cost pressures for some inputs, such as food and lumber, showed signs of easing. Most contacts expect price pressures to stabilize or even ease further over the coming months.
- Outlook: Most Districts expect economic activity to stabilize or improve slightly, though three Districts foresee slight declines in the near term.
District-Specific Developments
Boston
Economic activity increased modestly, driven by strong single-family home sales. Consumer spending slowed and job creation decelerated as employers exercised caution.
New York
Regional activity remained flat, with labor demand continuing to cool and increased worker availability. The housing market remained solid, with home prices edging up slightly.
Philadelphia
Economic activity declined slightly and consumer spending fell. Employment also showed signs of weakening, though wage and price growth remained modest.
Cleveland
Activity declined slightly as demand for manufactured goods softened further. Consumer spending fell moderately, while wage and price increases remained modest.
Richmond
The regional economy contracted slightly as consumer spending, especially for big-ticket items like vehicles and travel, pulled back. Manufacturing activity also declined slightly.
Atlanta
Economic activity fell slightly, with consumer spending and manufacturing activity both weakening. Leisure travel slowed, but business travel improved.
Chicago
Economic activity rose slightly, driven by slight increases in employment and business spending. Manufacturing and consumer spending were flat, while construction activity edged down.
St. Louis
Economic activity remained unchanged. Employment was stable, but households reported weaker finances and demand softened across sectors.
Minneapolis
Activity fell slightly, with flat employment and softening hiring trends. Manufacturing and construction activity both declined, while tourism held steady.
Kansas City
Economic activity remained stable, though firms reduced hiring activity compared to earlier in the year. Housing activity may improve if borrowing costs ease slightly.
Dallas
The economy expanded modestly, with stable employment and moderate wage growth. Most businesses expect demand to remain steady or improve in the next six months.
San Francisco
Economic activity was stable, but residential and commercial real estate activity softened. Manufacturing and consumer services saw slight declines, while employment rose modestly.
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