Two weeks ahead of the Federal Reserve’s next monetary policy meeting, the central bank’s Beige Book said Wednesday the U.S. economy expanded at only a slight to modest pace over the past month.
The Beige Book, a compilation of anecdotal evidence on economic conditions in the twelve Fed districts, noted business activity varied across the country.
Reports from districts representing states in the southern and western U.S. were generally more upbeat than districts representing the Midwest and Great Plains, the Fed said.
Household spending was solid and tourism and travel-related spending rose modestly, but the Fed said manufacturing activity continued to edge lower due to persistent trade tensions and slower global growth.
The Fed said agricultural conditions also continued to deteriorate amid the ongoing impacts of adverse weather, weak commodity prices, and trade disruptions.
Looking ahead, the Beige Book said business contacts mostly expect the economic expansion to continue, although many lowered their outlooks for growth in the coming 6 to 12 months.
The report said employment rose only slightly over the past month, with labor market tightness across skill levels and occupations restraining hiring.
A number of districts reported that manufacturers cut jobs because orders were soft, but some firms chose to reduce hours rather than staff levels due to concerns about the longer-term availability of workers.
The Fed said wages rose moderately in most districts even as employers continued to use non-wage approaches such as bonuses and benefits to attract and retain talent.
On the inflation front, the Beige Book said most districts characterized the recent pace of price increases as modest.
While both retailers and manufacturers noted rising input costs partly due to new tariffs, retailers had relatively more success passing the cost increases on to customers.
The release of the Beige Book comes ahead of the Fed’s next monetary policy meeting scheduled for October 29 and 30.
CME Group’s FedWatch Tool currently indicates an 89.3 percent chance the Fed will lower interest rates by another 25 basis points.