Fed Beige Book: “Economic Activity Expands Modestly, Prices Rise Moderately”

[Financial News] The U.S. central bank, the Federal Reserve System (Fed), assessed on Sept. 2 (local time) that U.S. economic activity had expanded modestly since early July and that prices had generally risen at a moderate pace.
It said demand related to data centers and defense had supported manufacturing activity, while uncertainty surrounding high energy prices and the war involving Iran had increased.
In the Beige Book released on Sept. 2 (local time), the Fed said, “Ten of the 12 Federal Reserve Bank (FRB) districts reported slight to moderate growth, while two reported no change.”
Regarding employment, it said that it had increased “very slightly,” while prices had risen “moderately.”
The Fed explained, “The overall outlook for the coming months was positive, but sentiment varied across industries,” adding, “Business contacts reported increased uncertainty about the effects of high energy prices, policy, and international conflicts.”
The Beige Book is an economic report based on recent trends gathered by the 12 FRBs through contacts with banks, businesses, and experts in their respective regions. It is typically released two weeks before a Federal Open Market Committee (FOMC) meeting, where monetary policy is decided.
The information in this Beige Book was collected through Aug. 24, ahead of the September FOMC meeting scheduled for Sept. 15–16.
Manufacturing activity increased in most districts.
Demand for defense- and data center-related orders was particularly strong.
Both positive and negative effects of artificial intelligence (AI) on labor demand were reported.
In the consumer sector, spending on high-priced goods remained solid, while consumers became more sensitive to prices.
However, analysts said the Beige Book did not appear to tilt expectations for the September rate decision decisively in either direction.
Markets are currently pricing in approximately a 62% chance of a rate hike and approximately a 38% chance of no change.
Fed Chair Kevin Warsh said last week that he would leave open the possibility of a rate hike if he was not convinced that inflation was declining toward the Fed’s 2% target “at a clear and sufficient pace.”

[email protected] International Affairs Specialist Lee Seok-woo Reporter