Fed Beige Book Shows Modest Economic Expansion Ahead Of Key GDP, Inflation Data Release

Zinger Key Points
  • The Beige Book showed modest growth in most Fed Districts during the April-mid May period.
  • Employment rose slightly, but labor shortages persisted. Retail spending was flat.

The Federal Reserve’s latest Beige Book — covering April to mid-May — reveals a continuation of modest economic expansion across most Districts, though two Districts noted no change in activity from the prior release.

The Beige Book provides qualitative data gathered by Federal Reserve policymakers from business contacts across Fed Districts. This data includes insights into economic conditions and trends, which policymakers consider alongside quantitative data to inform their decisions on monetary policy.

Notably, Thursday will bring the second estimate of Q1 U.S. gross domestic product, initially showing a 1.3% annualized growth, while Friday will feature the highly anticipated Personal Consumption Expenditure (PCE) price index for April, the Fed’s preferred inflation measure.

Key Insights From May’s Fed Beige Book

Consumer Spending and Retail:

  • Overall Activity: Retail spending was flat to slightly up, reflecting reduced discretionary spending and heightened price sensitivity among consumers.
  • Auto Sales: Auto sales were stable, with some districts noting manufacturers offering incentives to boost sales.
  • Travel and Tourism: Strengthened nationwide, driven by increased leisure and business travel, though the hospitality sector’s outlook for the summer was mixed.

Manufacturing and Services:

  • Nonfinancial Services: Demand rose, with transportation services showing mixed results. Port and rail activity increased, while trucking and freight demand varied.
  • Nonprofits and Community Organizations: Continued to report solid demand for their services.
  • Manufacturing: Described as flat to slightly up, though two districts reported declines.

Lending and Real Estate:

  • Credit Standards: Tight credit standards and high interest rates continued to constrain lending growth.
  • Housing Market: Housing demand rose modestly, with single-family construction increasing despite higher interest rates impacting sales.
  • Commercial Real Estate: Conditions softened due to supply concerns, tight credit conditions, and elevated borrowing costs.

Energy and Agriculture:

  • Energy Activity: Remained stable across districts.
  • Agriculture: Mixed reports, with some districts experiencing easing drought conditions but ongoing concerns over farm finances and incomes.

Labor Markets:

  • Employment: Rose at a slight pace overall. Eight districts reported negligible to modest job gains, while four reported no change in employment.
  • Labor Availability: Improved in most areas, though shortages persisted in select industries.
  • Hiring Plans: Mixed, with some districts expecting modest job gains and others noting a pullback due to weaker business demand and economic uncertainty.
  • Wage Growth: Mostly moderate, with several districts reporting normalization towards pre-pandemic levels.


  • Price Increases: Modest over the reporting period. Many districts noted consumer resistance to additional price hikes, leading to narrower profit margins as input costs rose.
  • Discounting: Retailers offered discounts to attract customers amid rising input costs, particularly insurance.
  • Material Costs: Some districts reported declines in certain construction material costs and manufacturing raw materials.
  • Price Outlook: Expected to continue growing at a modest pace in the near term.

Notable District Developments

  • Boston: Real estate activity for both commercial and residential properties weakened slightly after earlier improvements.
  • New York: Housing markets remained solid, though low inventory continued to restrain sales.
  • Philadelphia: Wage and price inflation rose modestly.
  • Cleveland: Some contacts attributed the slowdown to sustained high interest rates. Consumer spending declined modestly, impacting demand for manufactured goods.
  • Richmond: Import activity increased, and the Port of Baltimore reopened one channel.
  • Atlanta: Tourism remained strong, energy activity robust, while agricultural conditions softened.
  • Chicago: Prices and wages rose moderately, with financial conditions tightening slightly.
  • Minneapolis: Commercial and residential construction improved slightly, with strong home sales growth.
  • Kansas City: Household spending rose moderately, driven by increases in hotel stays, dining out, and auto maintenance.
  • Dallas: Growth was seen in manufacturing, banking, and energy sectors, while nonfinancial services were flat and retail sales declined.
  • San Francisco: Activity in service sectors and residential real estate markets weakened slightly.

Market Reactions

Wall Street showed no major reaction to the Fed Beige Book release, in a day broadly marked by declines across sectors as rising Treasury yields dampened investor risk sentiment.

Notably, the yield on the 30-year Treasury bond has seen a marginal uptick during the afternoon session in New York, rising by an overall 7 basis points on the day to 4.75%. This level is set to mark the highest close since May 2.

Bonds held session losses, with the iShares 20+ Year Treasury Bond ETF TLT down 1.3%, after a 1.4% drop on Tuesday.

Stock-wise the S&P 500, as tracked by the SPDR S&P 500 ETF Trust SPY, remained 0.6% lower for the day.

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