On balance, economic activity changed little since the previous report in September, with three districts reporting slight to modest growth, five reporting no change and four noting a slight softening, said the Federal Reserve Bank in its latest Beige Book report on the US economy Wednesday.
CONSUMER SPENDING
Overall consumer spending, particularly on retail goods, inched downward in recent weeks, although auto sales were boosted in some districts by strong demand for electric vehicles ahead of the expiration of a federal tax credit at the end of September, the Beige Book said.
Demand for leisure and hospitality services by international travelers fell further over the reporting period, while demand by domestic consumers was largely unchanged. Nevertheless, spending by higher-income individuals on luxury travel and accommodation reportedly was strong.
Several reports highlighted that lower- and middle-income households continued to seek discounts and promotions in the face of rising prices and elevated economic uncertainty, the Beige Book said.
MANUFACTURING ACTIVITY
Manufacturing activity varied by district, and most reports noted challenging conditions because of higher tariffs and waning overall demand, the Beige Book said. Activity in agriculture, energy and transportation generally was down among reporting districts.
Conditions in the financial services sector and other interest rate-sensitive sectors, such as residential and commercial real estate, were mixed; some reports noted improved business lending in recent weeks because of lower interest rates, while other reports continued to highlight muted activity.
THE OUTLOOK
The outlook for future economic growth varied by district and sector, the Beige Book said. Sentiment reportedly improved in a few districts, with some contacts expecting an uptick in demand over the next six to 12 months.
However, many others continued to expect elevated uncertainty to weigh on activity, the Beige Book said. One district report highlighted the downside risk to growth from a prolonged government shutdown.
LABOR MARKETS
Employment levels were largely stable in recent weeks, and demand for labor was generally muted, the Beige Book said. In most districts, more employers reported lowering head counts through layoffs and attrition, with contacts citing weaker demand, elevated economic uncertainty and, in some cases, increased investment in artificial intelligence technologies.
Employers that reported hiring generally noted improved labor availability, and some favored hiring temporary and part-time workers over offering full-time employment opportunities, the Beige Book said. Nevertheless, labor supply in the hospitality, agriculture, construction and manufacturing sectors was strained in several districts because of recent changes to immigration policies.
Wages grew across all reporting districts, generally at a modest to moderate pace, and labor cost pressures intensified because of outsized increases in employer-sponsored health insurance expenses, the Beige Book said.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $235.72 per cwt to $237.11, compared with last week’s range of $230.70 to $241.00 per cwt. FOB dressed steers and heifers went for $365.05 per cwt to $373.86, compared with $360.27 to $375.71.
The USDA choice cutout Wednesday was up $2.06 per cwt at $366.48 while select was down $1.39 at $349.16. The choice/select spread widened to $17.32 from $13.87 with 117 loads of fabricated product and 39 loads of trimmings and grinds sold into the spot market.
The USDA-listed the weighted average wholesale price for fresh 90% lean beef as $424.34 per cwt, and 50% beef was $139.36.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $0.90 to $1.15 a bushel over the Dec corn contract, which settled at $4.16 3/4, up $0.03 3/4.
Ten heifer delivery notices were posted Tuesday. No update was posted Wednesday.
The CME Feeder Cattle Index for the seven days ended Tuesday was $374.47 per cwt, up $1.45. This compares with Wednesday’s Oct contract settlement of $379.72, down $0.45.