Economic activity grows moderately amid inflation pressures: Fed

The Federal Reserve's latest Beige Book report showed the US economy expanded at a slight-to-moderate pace during late May and June, with labor market conditions remaining broadly stable and prices continuing to rise at a moderate pace amid ongoing uncertainty over fuel costs.

The report, which is released about two weeks ahead of each Federal Open Market Committee (FOMC) monetary policy meeting, highlighted that economic activity increased at a slight to moderate pace in 11 of the 12 Federal Reserve districts, while consumer spending rose modestly.

Spending on discretionary goods declined as some consumers shifted to lower-cost alternatives, although the tourism sector benefited from visitors attending the FIFA World Cup in certain districts.

Vehicle sales remained stable, while spending on maintenance services increased.

The agricultural sector continued to face challenges from lower commodity prices and higher production and borrowing costs, whereas oil and gas drilling activity expanded.

Manufacturing output also grew, supported by the data center, machinery, and defense industries, while construction and real estate activity recorded modest gains, driven by data center projects.

Financial conditions remained stable, with modest growth in both commercial and consumer lending.

Hiring increased slightly despite persistent shortages of skilled labor across several sectors, and wage growth ranged from slight to moderate in most districts.

Some companies expanded their use of artificial intelligence (AI) to support hiring and improve productivity.

Prices continued to rise at a moderate pace, although the rate of increase was unchanged or slower than in the previous report, as higher energy, transportation, and raw material costs pushed up production costs and pressured some companies' profit margins, with costs rising faster than selling prices.

Inflation expectations were mixed, with some contacts expecting inflation to remain at current levels, while others anticipated a slowdown in the coming months.