Fed’s Beige Book flags war-driven uncertainty, growing consumer strain in US economy

The US economy expanded at a slight to modest pace in recent weeks, but households across much of the country showed mounting signs of financial strain as higher prices and war-related uncertainty weighed on activity, according to the Federal Reserve’s Beige Book released Wednesday.

The report said the conflict in the Middle East was “a major source of uncertainty” for businesses, complicating decisions on hiring, pricing, and capital investment across the Federal Reserve’s 12 districts.

Overall economic activity increased at a slight to modest pace in eight districts over the past six weeks, while two districts reported little change and two others saw slight to modest declines.

Consumer spending rose slightly overall, but many districts continued to report growing price sensitivity, financial stress, and increased demand at food banks and other social service organizations.

“Many Districts continued to report signs of consumer financial strain, increased price sensitivity, and rising demand at food banks and other social service organizations, while spending among higher-income consumers was resilient,” the report said.

Businesses indicated that low- and moderate-income households were under particular pressure, with widespread trading-down behavior persisting and requests for assistance increasing.

Price growth remained mostly moderate, although input costs generally rose faster than selling prices, squeezing business margins.

Energy and fuel costs climbed sharply across all districts due to the Middle East conflict, driving up freight and shipping costs as well as prices for plastics, fertilizers, and other petroleum-based products.

Employment was steady to slightly higher overall, with most districts describing labor demand as stable, low turnover, and limited layoffs. Wage growth continued at a modest to moderate pace, though firms remained cautious, with several districts reporting stronger demand for temporary or contract workers instead of permanent hires.

Housing activity softened in several districts, while business outlooks varied amid broad uncertainty over future economic conditions.