Federal Reserve Records Indicators of Slowing in the U.S. Economy

SadaNews - Economic activity in the United States has not seen any significant change in recent weeks, while employment levels have remained largely stable, according to the U.S. Federal Reserve.

The "Beige Book" released on Wednesday by the Federal Reserve, which is based on a survey conducted among regional businesses, indicated that consumer spending has decreased slightly overall, while prices continued to rise, with several regions recording an increase in input costs at a faster pace.

The Federal Reserve stated: "Input cost increases due to tariffs were reported in many regions, but the extent to which those increases were passed on to final consumer prices varied." It added that some companies chose to keep selling prices unchanged to retain their customers, while others passed the full increase in costs onto consumers.

Economic Uncertainty Amid Regional Disparities

The report was based on information collected by the 12 Federal Reserve branches up until October 6, and was gathered by the Federal Reserve Bank of San Francisco. Three regions reported slight to moderate growth in economic activity, while five regions noted stability, and four regions indicated a slight slowdown.

Forecasts about growth varied across regions, as some participants anticipated an increase in demand over the next six to twelve months, while one region warned of the risks of a prolonged government shutdown on growth.

Expectations for an Upcoming Interest Rate Cut

Reports on the performance of businesses and consumers have become increasingly important during the government shutdown, which has delayed the release of key economic data. Policymakers remain divided on how much to cut interest rates as they attempt to balance a slowing labor market with inflation that remains above the Federal Reserve's 2% target.

Federal Reserve Chair Jerome Powell hinted on Tuesday that the U.S. central bank is preparing to lower interest rates later this month. He noted that the economic outlook has not changed much since officials cut the benchmark interest rate in September and suggested two additional quarter-point cuts later this year.

Investors view a rate cut at the October 28-29 meeting as almost certain, according to futures pricing.

Staff Reductions

In most regions, more employers reported reducing staff through layoffs or not replacing resignations. They cited weak demand, ongoing economic uncertainty, and investment in artificial intelligence. Companies that attempted to hire indicated that they found it easier to locate workers, despite ongoing challenges in some sectors.

The report stated that "the labor supply in the hospitality, agriculture, construction, and manufacturing sectors has been limited in several regions due to recent changes in immigration policies."

Highlights from the Federal Reserve Regions

Philadelphia: "Several dealers noted that some suppliers are using tariffs as an excuse to raise prices, even when their goods are not subject to those tariffs."

Cleveland: "One manufacturer said they postponed layoffs while waiting for industrial production to recover, but they can no longer delay further."

Atlanta: "Participants warned that the passing on of price increases due to tariffs has only just begun, and they expect prices to continue rising until 2026."

Chicago: "A trucking sector worker described the current situation as 'resembling a recession.'"

Kansas City: "Despite high input costs remaining a primary burden, one manufacturer said raw material costs have 'entered a boiling phase,' adding that companies 'are no longer forced to face every shock individually.'"

Dallas: "The number of workers in the energy sector has declined as companies continue to find ways to complete more wells in less time with fewer employees."

Minneapolis: "An advertising company in Minnesota stated that 'demand for entry-level employees will be lower' because artificial intelligence tools 'complete this work faster.'"

San Francisco: "Reports indicated more business closures and reduced working hours, along with some increases in loan delinquency rates."

St. Louis: "Participants in manufacturing, construction, and agriculture sectors reported a continued labor shortage due to some workers missing work out of fear of deportation."