Regional reports show the US economy's marginal growth, with modest employment increases and consumer caution
The US economy experienced slight growth heading into the third quarter.
Several regions reported flat or declining activity, according to the Federal Reserve's Beige Book survey of regional business contacts, according to BNN Bloomberg.
Employment increased marginally, and labour turnover declined. Several districts reported plans to be more selective in hiring and to avoid backfilling open positions.
Five districts reported flat or declining economic activity, an increase from the previous period. Businesses anticipate continued slowing.
“Expectations for the future of the economy were for slower growth over the next six months due to uncertainty around the upcoming election, domestic policy, geopolitical conflict, and inflation,” the report notes.
Wages increased modestly to moderately in most districts, and prices saw modest overall growth. Consumer spending remained largely unchanged.
Nearly every district mentioned retailers discounting items or price-sensitive consumers buying only essentials, opting for lower-quality items, purchasing fewer items, or seeking the best deals.
Fed officials, led by Chair Jerome Powell, recently stated that progress is being made toward the 2 percent inflation goal, though they have been vague about the timing of interest rate cuts.
“While I don’t believe we have reached our final destination, I do believe we are getting closer to the time when a cut in the policy rate is warranted,” Governor Christopher Waller said.
The unemployment rate, currently at 4.1 percent, has risen slightly over the past three months from a low of 3.4 percent in 2023. Signs of a softening labour market have raised concerns about its resilience under Fed policy pressures.
Inflation moderated in the second quarter following an unexpected rise in the first three months of 2024. The core consumer price index, which excludes food and energy costs, rose only 0.1 percent in June, marking the smallest monthly increase since 2021.
Fed officials indicate that the recent moderation in the labour market requires careful attention to both full employment and price stability. The Federal Open Market Committee is expected to maintain its benchmark rate in July, a year after reaching the current 5.25 to 5.5 percent target range.
Investors anticipate at least two rate cuts before the end of 2024, starting in September, based on futures predictions.
Compiled by the Federal Reserve Bank of Richmond using information gathered by July 8, the latest Beige Book offers insights into business conditions across the 12 Fed districts.
