Economic activity increased at a slight to moderate pace for 10 of the 12 Federal Reserve districts, while one district reported a slight decline and one reported no change, said the Bank’s Beige Book.
The Beige Book is released eight times a year and summarizes economic activity and changes from the previous report. The latest report was released Wednesday.
CONSUMER SPENDING MIXED
Consumer spending remained mixed and increasingly was split across income groups amid affordability pressures. Higher-income households remained resilient and less sensitive to price increases, while middle-income households were described as “squeezing more life out of every dollar before deciding to spend it,” and low-income consumers showed greater financial strain.
Overall, there were reports of increased credit card usage, fewer retail visits, and stronger demand for necessities. Auto dealers reported softer new vehicle demand tied to affordability and fuel costs, alongside substitution toward used and hybrid vehicles.
By contrast, manufacturing activity increased at a modest-to-strong pace for nine of the districts and only one noted a slight decline from the previous period.
Banking conditions were stable across most districts. However, residential mortgages, consumer and agricultural loan delinquencies were rising in several districts. Agriculture conditions were unchanged or declined for most districts, with cost pressures intensifying from fuel and fertilizer spikes.
Energy activity increased in two markets, but districts reported the outlook remained highly uncertain leading producers to hold off on expanding activity materially. More broadly, business outlooks for the next six months were reported to have little change, as elevated uncertainty and signs of weakening consumer spending weighed on sentiment.
LABOR MARKETS
Employment showed little to no change across 11 districts, while one experienced modest growth. Manufacturing hiring was the strongest sector in several districts, supported by defense-related activity and rising data-center demand.
Wage growth generally remained modest to moderate and largely in line with inflation. That said, districts reported more frequent wage adjustments and cost-of-living increases to manage increasing fuel and other household cost pressures. Most districts described a low-hire, low-fire environment, with employees increasingly reluctant to change jobs because of economic uncertainty.
Hiring remained selective and primarily focused on critical roles or attrition replacement. Professional services occupations had mixed demand conditions, partly reflecting shifts in technological and operational changes.
PRICES
Prices increased at a moderate to strong pace overall, with most districts reporting higher inflation than the previous report. Districts reported energy-related costs tied to the Middle East conflict were the primary drivers of inflationary pressures, with spillovers into shipping, packaging, groceries, and fertilizer.
Non-labor input costs continued to rise faster than selling prices, contributing to broader concerns about margin compression. The ability to pass on higher costs remained mixed across sectors, particularly among consumer-facing firms.
Consumer uncertainty and concerns about fuel prices affecting households were noted by several districts. Several regions highlighted inflation mitigation strategies of firms that ranged from supply chain optimization, product adjustments, reduced offerings, and temporarily absorbing higher costs to preserve customer demand.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $256.34 per cwt to $262.08, compared with last week’s range of $236.71 to $264.00 per cwt. FOB dressed steers and heifers went for $405.24 per cwt to $409.71, compared with $407.61 to $416.65.
The USDA choice cutout Wednesday was up $1.79 per cwt at $395.86 while select was down $0.38 at $384.43. The choice/select spread widened to $11.43, from $9.26 with 60 loads of fabricated product and 32 loads of trimmings and grinds sold into the spot market.
The USDA-listed the weighted average wholesale price for fresh 90% lean beef as $458.00 per cwt, and 50% beef was $181.81.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.20 to $1.40 a bushel over the Jul corn contract, which settled at $4.31 1/2 a bushel, down $0.09.
The CME Feeder Cattle Index for the seven days ended Tuesday was $364.14 per cwt, down $0.12. This compares with Wednesday’s Aug contract settlement of $342.62, down $5.80.