EconoFACTS

May 29, 2024 | 15:12

Beige Book Paints a Mixed Picture of Economic Activity

The Federal Reserve Beige Book describes an economy that is still expanding though slowing. Most Districts cited “slight or modest growth”, while two observed “no change in activity’. Consumer spending was “flat to up slightly” amid softer discretionary spending and “heightened price sensitivity among consumers”. Auto sales were basically unchanged with a few regions mentioning that manufacturers were “offering incentives to spur sales”. On a more upbeat note, travel and tourism “strengthened” across most Districts, though the outlook for summer travel was mixed. Meanwhile, “tight credit standards and high interest rates continued to constrain lending growth”, while the general outlook “grew somewhat more pessimistic amid reports of rising uncertainty and greater downside risks”.

Labor Market

Employment “rose at a slight pace overall”, with eight Districts reporting “negligible to modest job gains” and the other four reporting “no changes in employment”. Most regions reported ‘better labor availability”, though shortages persisted in certain industries and geographies. Multiple Districts stated “employee turnover has decreased” and one District noted that “employers’ bargaining power has increased”, pointing to a looser labor market. Hiring intentions were mixed, with some areas seeing a “pullback in hiring” amid “weaker business demand”. Finally, wage growth was “mostly moderate”.

Prices

Prices rose at a “modest pace” while most areas stated “consumers pushed back against additional price increases”, resulting in lower profit margins. Retailers offered discounts to “entice customers” and many regions reported a “continued increase in input costs”. Inflation is "expected to continue at a “modest pace in the near term”.

Bottom line: The depiction of U.S. economic activity expanding at a more modest pace is in harmony with our forecast of slower real GDP growth this year, particularly as consumers’ cut back on discretionary spending amid still-elevated prices and rates and weaker employment growth.