EconoFACTS

January 15, 2025 | 15:00

Beige Book Reveals Resilient Consumer, Pick-up in Wages

Economist

Chief U.S. Economist and Managing Director
Economics

Scott Anderson is BMO’s Chief U.S. Economist and Managing Director. He analyzes and forecasts U.S. national and ... (Read more)

Scott Anderson , Ph.D.

Chief U.S. Economist and Managing Director
Economics

Scott Anderson is BMO’s Chief U.S. Economist and Managing Director. He analyzes and forecasts U.S. national and ... (Read more)

The Fed’s January Beige Book report, released this afternoon, adds to the evidence of a strong and resilient consumer and labor market at the end of 2024. The report noted that consumer spending “moved up moderately” with most Districts reporting “strong holiday sales that exceeded expectations”. Leisure and hospitality and air travel growth remained strong.

Employment “ticked up” on balance with Districts reporting strength in services and health care with construction employment increasing “slightly”, and manufacturing employment “decreasing slightly” on net.

Multiple sectors continued to mention difficulty finding skilled workers, and reports of layoffs remained rare.

Perhaps raising a few eyebrows at the Fed, the report noted that wage growth picked up to a “moderate pace” in most Districts.

The price trends remained relatively tame, however. Contacts noted that prices continued to increase modestly with instances of flat or decreasing prices, particularly in retail and manufacturing sectors. Input costs continued to rise with contacts highlighting higher health insurance prices. Contacts expect prices to continue to rise in 2025 with higher tariffs potentially contributing to the price increases.

Bottom Line: There is nothing in the latest Beige Book that will push the Fed off the sidelines at the January FOMC meeting. Fourth quarter consumer spending and economic growth were clearly solid. Employment growth rebounded, and wage pressures picked up. Overall price trends remained fairly tame, but upside risks from tariffs in the new year are clearly evident in this report. 'Wait and see' is probably the most prudent monetary policy approach right now, until we get more clarity on the path for tariffs and inflation.