Economic Activity Slows Due to Declining Consumer Spending and Manufacturing: Fed

Economic activity has slowed across various districts, primarily due to reduced consumer spending and a decline in manufacturing, according to the Federal Reserve’s Beige Book released on Wednesday.

The report indicates that while economic activity rose slightly in three districts, the number reporting flat or declining activity increased from five in the prior period to nine in the latest review. This analysis is based on anecdotal information gathered by the Fed’s 12 reserve banks up until August 28.

The decline in consumer spending and manufacturing activity has contributed to a slowdown in overall economic growth. In the labor market, employment levels remained stable; however, there are reports of companies filling only essential positions, decreasing hours and shifts, or reducing overall employment through attrition. This suggests a potential cooling in the labor market.

Employers have become more selective in their hiring and are hesitating to expand their workforces, citing concerns about demand and an uncertain economic future. The labor market will be closely observed ahead of the upcoming job report for August, which could provide insights on whether the weaker nonfarm payroll figures from July were a one-off occurrence or indicative of a broader slowdown.

On the inflation front, price increases have been modest, with most districts reporting only slight increases in selling prices. Expectations for the future are somewhat cautious; while contacts foresee stabilization or even a decrease in price and cost pressures in the coming months, concerns regarding the upcoming election, geopolitical tensions, and ongoing inflation contribute to uncertainty surrounding future growth.