Fed Beige Book: Most Areas See Economic Growth, Consumer Spending Improves

Summary

The Fed’s Beige Book indicates that economic activity saw slight to moderate growth in eight of its twelve districts, an improvement from previous reports Wallstreetcn+ 2. This was largely driven by consumer spending during the holiday season, with high-income households showing particularly strong spending on luxury goods, travel, and experiences Wallstreetcn+ 2. While employment levels were stable and wages grew moderately, some firms began passing on tariff costs, pressuring margins JIN10. Fed officials remain cautious about rate cuts due to above-target inflation, and investors don’t anticipate a cut before June JIN10.

Impact Analysis

So the headline is ‘modest improvement,’ but the real story here is the confirmation of the K-shaped consumer. The report explicitly calls out that growth is being propped up by high-income groups spending on luxury and travel Wallstreetcn+ 2. This isn’t broad-based strength; it’s a narrow engine. Remember that report from early January showing the widening gap in spending between high and low-income groups? AnueSec This Beige Book is the official stamp on that thesis. For the Fed, this is the perfect ‘do nothing’ report. It’s not weak enough to force a cut, but it’s not strong enough to kill the soft-landing narrative. It justifies their caution JIN10. The play here remains clear: long high-end discretionary and experiences, short the mass-market retailers exposed to the squeezed consumer whose confidence in finding a new job is at a decade-low Wallstreetcn.