U.S. economic activity increased modestly, employment rose slightly and prices increased moderately in recent weeks, according to a mixed report published on Wednesday by the Federal Reserve that may do little to convince central bank policymakers one way or another as they weigh whether to raise interest rates at their September 15-16 meeting.
Activities continued to expand modestly, although the macro assessment was slightly more mixed than in the previous Beige Book. Ten of the 12 Fed districts reported slight-to-moderate growth, while two were unchanged, compared with 11 districts reporting growth and only one unchanged in July. Consumer spending increased only slightly amid greater price sensitivity, while auto sales remained subdued due to weak confidence, higher fuel prices and financing costs. Nevertheless, manufacturing and construction continued to report healthy labour demand.
Inflation remains the bigger concern despite few signs of a renewed acceleration. Prices increased moderately across most districts, with the pace unchanged in eight districts, easing in three and accelerating in only one. However, businesses continued to face elevated input costs, particularly from energy, transportation, metals and petrochemicals, in addition to tariff-related pressures. At the same time, firms’ ability to pass on these cost increases is increasingly constrained by more price-sensitive consumers, suggesting some moderation in underlying demand.
