The most recent Beige Book released by the Federal Reserve indicates that most districts observed a slight increase in economic activity, with the overall growth outlook improving moderately across a majority of regions and sectors. 'Three regions exhibited modest or moderate growth that offset flat or slightly declining activity in two others,' the report notes, which was prepared by the Kansas City Fed and based on information collected up to November 22.
Consumer spending during this period remained 'generally stable.' The previous report, released on October 23, had indicated that economic activity in nearly all districts was 'little changed' since early September, but the long-term outlook had slightly improved, presenting a more optimistic view. Price increases were observed at a 'modest' rate across districts, according to the latest Beige Book.
For most businesses, input prices rose at a faster rate than selling prices, resulting in reduced profit margins. Although contacts expect the current price growth rate to continue, businesses in several districts highlighted that tariffs present 'a significant upside risk' to inflation. Employment levels across districts remained flat or slightly higher, with hiring activity being described as 'subdued' and layoffs staying low.
For the upcoming year, contacts anticipate that employment will either remain steady or increase slightly, yet a cautious tone was expressed regarding a possible uptick in hiring activity. 'Wage growth softened to a modest pace across most districts, as did expectations for wage growth in the coming months,' the report states. The demand for electricity generation continued to rise at a 'robust' pace, largely fueled by rapid expansions in data centers.
Meanwhile, mortgage demand was low overall, and commercial real estate lending could also be characterized as 'subdued.' Despite the generally modest economic activity growth, expectations for future growth have risen moderately across most areas and sectors. Business contacts conveyed a sense of optimism about an expected increase in demand in the coming months..