Fed Beige Book: Slight Economic Growth in the Third Quarter, Moderation in Price Increases

According to the latest Beige Book survey released by the Federal Reserve on Wednesday, the U.S. economy saw modest growth in the third quarter, with economic activity in some regions remaining flat or declining.

The report noted that employment saw only a slight increase. Labor mobility decreased, and many business contacts in various regions expect to be more selective in hiring, not filling all vacant positions. The latest Beige Book was compiled by the Richmond Federal Reserve Bank based on information collected before July 8. Wages in most regions grew slowly or moderately, while overall price increases slowed down. Consumer spending remained almost unchanged, with almost all regions mentioning retailers offering discounts or consumers only purchasing essential goods.

During this reporting period, economic activity in most regions maintained slight to moderate growth. While seven regions reported increased economic activity, five regions saw activity remaining flat or declining, an increase of three regions compared to the previous reporting period. Wages in most regions continued to grow at a slow to moderate pace, with prices generally rising slightly.

According to reports from banks in most regions, household spending remained relatively stable. Car sales varied across regions, with some regions noting a decrease in sales due to dealerships being affected by cyber attacks and high interest rates. Consumer and business loan demand remained weak in most regions. The residential and commercial real estate markets varied, but most banks reported little change in recent weeks. Tourism and travel activities grew steadily, in line with seasonal expectations. Agricultural conditions varied due to localized droughts nationwide. Manufacturing activities differed across regions, ranging from rapid decline to moderate growth. Retail restocking drove slight growth in transportation activities, but tight shipping capacity led to a sharp increase in spot rates. Expectations for economic growth in the next six months have slowed due to uncertainties surrounding elections, domestic policies, geopolitical conflicts, and inflation.

In terms of the labor market, employment saw slight growth in the most recent reporting period. Most regions reported stable or slightly increasing employment, with a few regions reporting moderate growth in employment. Employment in the manufacturing sector declined in some regions due to reduced new orders. The supply of skilled workers remained a challenge in all regions, although some regions reported improvements in labor supply conditions. Additionally, labor mobility decreased, reducing the demand for finding new workers.

Looking ahead, contacts in several regions expect to be more selective in hiring, not filling all vacant positions. Wages in most regions are growing at a slow to moderate pace. However, due to increased labor supply and reduced competition, wage growth has slowed in some regions.

Overall, prices are rising at a slight pace, with only a few regions noting slight increases. While consumer spending remains relatively stable, almost all regions mentioned retailers offering discounts, consumers only buying essentials, lowering quality, purchasing fewer goods, or comparing prices to find the best deals. Most regions noted that input costs are starting to stabilize; however, Atlanta specifically highlighted significant increases in copper and electrical supply prices during this period Analysts say that the July Beige Book may enhance the Fed's confidence in cutting interest rates at the upcoming meeting. The description of "slight to moderate" economic growth is similar to the May report, but details show signs of softness on the margin - including stabilizing input costs, slowing wage growth, and lower growth expectations. Analysts expect that policymakers will begin to gradually unwind policy restrictions at the September FOMC meeting, which should provide them with some comfort