Federal Reserve Beige Book: Economic activity slightly increased under the boost of holiday sales, optimistic outlook but concerns over policy remain

According to the Beige Book report released by the Federal Reserve, overall economic activity in the United States showed "slight to moderate" growth from late November to December, primarily supported by strong holiday sales. Nevertheless, businesses generally have an optimistic outlook for 2025, although some express concerns about the potential impacts of changes in immigration and tariff policies.

The report noted that some manufacturers are increasing inventory reserves in response to potential higher tariffs. Employment overall saw a slight increase during this period, with six of the twelve Federal Reserve districts reporting slight growth in hiring, while the other six showed no significant changes. Wage levels have risen in most areas, particularly in service industries such as healthcare, which continue to exhibit strong employment growth. However, employment in manufacturing has remained relatively flat.

In terms of prices, there has been "moderate growth" overall. Many businesses expect prices to continue rising in 2025, with some mentioning that new tariffs could drive up costs. Particularly in the retail and manufacturing sectors, while overall prices have slightly increased, there have also been cases of prices remaining stable or declining.

Here are some specific situations from various regions:

St. Louis: A business in the Memphis area stated that generative artificial intelligence technology will "shape its workforce structure" in the coming year, with existing employees relying on new technologies and new hires needing relevant skills.

Minneapolis: A contact at a shopping center in Minnesota noted that labor demand during the holiday season "does not seem to be a challenge" compared to previous years.

Kansas City: Food manufacturing and agricultural businesses in Kansas and Nebraska indicated that restrictions on temporary immigrant labor could lead to supply shortages. The leisure and hospitality industry in Colorado is also concerned that immigration restrictions will exacerbate labor shortages near vacation communities.

Dallas: Businesses generally believe that potential tariffs will raise input costs, so many plan to pass on the increased costs to consumers. Although input cost growth is expected to slow in 2025, businesses plan to raise sales prices by more than in 2024.

New York: Tourism activity in New York City performed strongly at the end of the year, with visitor numbers returning to pre-pandemic levels for the first time since 2019. Contacts expect 2025 to be a record year for the tourism industry.

Philadelphia: Most businesses expect inflationary pressures to increase due to changes in fiscal, trade, and immigration policies.

Cleveland: Many manufacturers are reducing labor by cutting shifts or not replacing departing employees to cope with reduced order volumes.

Atlanta: Many businesses plan to maintain stable employee numbers in 2025, with a few expecting to slightly reduce staff through natural attrition, and some may even lay off workers due to weak demand.

The Beige Book is compiled based on regional economic information as of January 6 and is organized by the Chicago Federal Reserve. The report specifically mentions that this data was collected before the recent wildfires in Los Angeles.

Recent economic data shows that the U.S. job market is performing strongly, while inflation signals are encouraging. A key inflation indicator released on Wednesday showed that core inflation has slowed for the first time in six months. The Beige Book is one of the important economic briefings for Federal Reserve officials before policy meetings The next meeting of the Federal Reserve is scheduled for January 28-29, and the market expects the possibility of a benchmark interest rate cut to be almost zero at that time