The Federal Reserve's Beige Book, a summary of the nation's economic situation, reported a moderate increase in economic activity during July and August 2023, as per the update published on Thursday. This represents a continuation from the previous report which covered the period from May through July.
The report highlighted a general slowdown in the rise of consumer expenditure across most districts, with some areas indicating an increased reliance on borrowed money to support spending. Despite this trend, tourism spending exceeded expectations due to increased demand for travel.
On Wednesday, the Federal Reserve Bank of Kansas City, which prepared the report, noted that contacts from most districts indicated modest economic growth during July and August. While retail spending continued to slow, particularly on non-essential items, new auto sales expanded in many districts. However, this was attributed more to improved inventory availability rather than increased consumer demand.
In terms of manufacturing, supply chain delays have reportedly seen improvements in several districts. This has enabled manufacturers to better meet existing orders. However, new orders were either stable or declined in most districts with backlogs shortening as demand for manufactured goods waned.
The housing market continued to face challenges with nearly all districts reporting constrained inventories of homes for sale. Despite this, new construction activity for single-family housing picked up. The construction of affordable housing units faced increasing challenges due to higher financing costs and rising insurance premiums.
Banking sector respondents reported mixed experiences regarding loan demand growth. While most indicated that consumer loan balances rose, some districts reported higher delinquencies on consumer credit lines. Energy-related activities remained virtually unchanged during the final months of summer.
Job growth across the nation was subdued with hiring slowing down. However, labor market imbalances persisted as the availability of skilled workers and the number of applicants remained constrained. Growth in labor cost pressures was elevated in most districts, often exceeding expectations during the first half of the year. Businesses across nearly all districts renewed previously unfulfilled expectations that wage growth will slow broadly in the near term.
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