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Fed Beige Book (June): Economic activity increased at a slight to moderate pace for ten of the twelve Federal Reserve Districts, while one District reported a slight decline and one reported no change.

Newsquawk Staff ·

Overall Economic Activity

  • Economic activity increased at a slight to moderate pace for ten of the twelve Federal Reserve Districts, while one District reported a slight decline and one reported no change. 
  • Consumer spending remained mixed across Districts and increasingly bifurcated across income groups amid affordability pressures. 
  • Higher-income households remained resilient and less sensitive to price increase, while middle-income households were described as "squeezing more life out of every dollar before deciding to spend it," and low-income consumers showed greater financial strain. 
  • Overall, there were reports of increased credit card usage, fewer retail visits, and stronger demand for necessities. 
  • Auto dealers reported softer new vehicle demand tied to affordability and fuel costs, alongside substitution toward used and hybrid vehicles. 
  • By contrast, manufacturing activity increased at a modest to strong pace for nine of the Districts and only one noted a slight decline from the previous period. 
  • Banking conditions were stable across most Districts; however, residential mortgages, consumer, and agricultural loan delinquencies were noted as rising in several of the Districts.
  • Agriculture conditions were unchanged or declined for most of the Districts, with cost pressures intensifying from fuel and fertilizer spikes. 
  • Energy activity increased in two of the markets, but Districts reported that the outlook remains highly uncertain leading producers to hold off on materially expanding activity. 
  • More broadly, business outlooks for the next six months were reported to have little change in anticipated growth, as elevated uncertainty and signs of weakening consumer spending weighed on sentiment.

Labor Markets

  • Employment showed little to no change across eleven Districts, while one District experienced modest growth. 
  • Manufacturing hiring was the strongest sector in several Districts, supported by defense-related activity and rising data center demand. 
  • Wage growth generally remained modest to moderate and largely in line with inflation. 
  • That said, Districts reported more frequent wage adjustments and cost-of-living increases to manage increasing fuel and other household cost pressures. 
  • Most Districts described a low-hire, low-fire environment, with workers increasingly reluctant to change jobs because of economic uncertainty. 
  • Hiring remained selective and primarily focused on critical roles or attrition replacement. 
  • Professional services occupations had mixed demand conditions, partly reflecting shifts in technological and operational changes.

Prices

  • Prices increased at a moderate to strong pace overall, with most Districts reporting higher inflation than the previous report. 
  • Districts noted that energy-related costs tied to the conflict in the Middle East were the primary driver of inflationary pressures, with spillovers into shipping, packaging, groceries, and fertilizer. 
  • Non-labor input costs continued to rise faster than selling prices, contributing to broader concerns about margin compression. 
  • The ability to pass on higher costs remained mixed across sectors, particularly among consumer-facing firms.
  • Consumer uncertainty and concerns about fuel prices impacting households were noted by several Districts. 
  • Several regions highlighted inflation mitigation strategies of firms that ranged from supply-chain optimization, product adjustments, reduced offerings, and temporarily absorbing higher costs to preserve customer demand.

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