Fed's Beige Book Shows Slight Growth: Consumer Spending Slips As Prices Rise

The Federal Reserve's Beige Book released Wednesday showed a slight increase in overall economic activity since mid-January, with six Districts reporting no change, four reporting modest or moderate growth and two noting slight contractions. However, consumer spending decreased while price sensitivity for discretionary items increased, particularly among lower income consumers. 

Key Points from the national summary of all twelve Federal Reserve Districts: 

Prices

Prices increased moderately in most Districts, with some reporting an uptick in the pace of increase. Input price pressures were generally greater than sales price pressures, particularly in manufacturing and construction.

• Higher prices for eggs and other food ingredients impacted food processors and restaurants.
• Substantial increases in insurance and freight transportation costs were widely reported. 
• Severe weather conditions weakened demand for leisure and hospitality services and vehicle sales were modestly lower on balance. 

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Sector-Specific Trends

• Manufacturing activity showed slight to modest increases across most Districts.
• Banking activity was slightly higher on balance.
• Residential real estate markets were mixed, with ongoing inventory constraints. 
• Construction activity declined modestly for both residential and nonresidential units.
• Agricultural conditions deteriorated in the Fed's 12 Districts. 

Labor Markets 

• Employment increased slightly overall, with four Districts reporting a slight increase, seven reporting no change and one reporting a slight decline.
• Labor availability improved for many sectors, though some targeted areas remained tight.
• Wage growth slowed slightly, occurring at a modest-to-moderate pace. 

Market Reactions

Markets showed little reaction to the Beige Book release, instead recovering some of the week's losses after President Donald Trump said he will delay auto tariffs for one month. 

The SPDR S&P 500 ETF Trust (NYSE:SPY), tracking the S&P 500, was up 1.17% at $583.62 and the Invesco QQQ Trust (NASDAQ:QQQ), tracking the Nasdaq 100 index, was up 1.43% at $502.62 at the time of publication.  

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