Fed’s Beige Book: Economic Outlook Has ‘Improved Slightly’
The Fed added that contacts across a wide range of industries “expect cost pressures to remain elevated in the coming months,”
Quick overview
- The U.S. economy showed slight improvement, with economic activity increasing from late May to early July, despite ongoing uncertainty.
- Employment growth was cautious, with businesses expressing concerns over economic and monetary policy outlooks.
- Inflation pressures rose across all districts, driven by tariffs and increased costs for raw materials and insurance.
- Businesses anticipate continued cost pressures, which may lead to noticeable increases in consumer prices by late summer.
The U.S. economy saw a slight improvement in outlook, despite ongoing uncertainty and rising cost pressures driven by President Donald Trump’s tariffs and stricter immigration policies, according to the Federal Reserve’s Beige Book published Wednesday.
The report noted that “economic activity increased slightly from late May through early July,” based on anecdotal information collected by the Fed’s 12 regional banks through July 8. It added that uncertainty remained “elevated, contributing to continued business caution.”
Labor Market Remains Cautious
Employment “rose only slightly overall,” with hiring described as “generally cautious.” Many business contacts cited “continued uncertainty about the economic and monetary policy outlook.”
Several districts also reported “a decline in the availability of foreign-born workers,” attributed to recent changes in immigration policy.
Pricing Pressures Pick Up
On inflation, prices “increased across all districts,” with seven describing the pace as moderate and five as modest, showing little change from the previous report.
Businesses in all 12 districts reported “moderate to pronounced input cost pressures related to tariffs,” particularly for raw materials used in manufacturing and construction.
Firms also faced “rising insurance costs,” and while many passed on at least some of the increases to consumers through price hikes or surcharges, others refrained “due to growing price sensitivity among customers,” which in turn compressed profit margins.
The Fed added that contacts across a wide range of industries “expect cost pressures to remain elevated in the coming months,” raising the likelihood that consumer prices could begin rising more noticeably by late summer.
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