From early April to mid-May, U.S. economic activity exhibited continued growth, as reported by the Federal Reserve's Beige Book. However, this expansion showed significant variation across different industries and geographical districts.
The Beige Book, which compiles anecdotal evidence on economic conditions across the Federal Reserve's twelve districts, revealed that while most districts experienced slight or modest growth, two districts observed no change in activity.
Retail spending remained mostly stagnant or saw marginal improvements, influenced by reduced discretionary spending and an increased price sensitivity among consumers. The report noted that many consumers resisted further price increases, impacting profit margins as input costs rose on average.
Travel and tourism sectors showed strength nationwide, driven by heightened leisure and business travel. However, hospitality contacts were divided on their outlook for the summer season. The demand for non-financial services grew, transportation services saw mixed results, and manufacturing activity was generally stable to slightly up.
In the labor market, overall employment saw modest increases, with eight districts noting negligible to modest job gains, while the remaining four observed no change. Wage growth was mostly moderate, with some districts experiencing more modest increases. The report highlighted that several districts observed wage growth returning to pre-pandemic historical averages or normalizing towards those rates.
Prices increased modestly during the reporting period and are anticipated to continue growing at a similar pace in the near future.
The Beige Book is usually issued two weeks before the Federal Reserve's next monetary policy meeting, which is scheduled for June 11-12. According to the CME Group's FedWatch Tool, there is a 99.1 percent probability that the Fed will maintain current interest rates at the upcoming meeting.
