The U.S. Economy: Mixed Growth, Flat Retail Spending, and Increased Price Sensitivity

The U.S. economy continued to grow from early April to mid-May, with slight or modest growth reported in most Federal Reserve districts, according to the Beige Book. However, retail spending was described as flat to slightly up, reflecting decreased discretionary spending and increased price sensitivity among consumers. Additionally, many districts noted that consumers were pushing back against additional price increases, leading to smaller profit margins as input prices rose.

On the other hand, travel and tourism saw an improvement across much of the country, driven by increased leisure and business travel. Meanwhile, hospitality contacts for the summer season had varying outlooks on demand for non-financial services and transportation services had mixed activity levels. Manufacturing was mostly flat to increasing. Overall employment slightly increased with some districts reporting modest job gains and others reporting no changes in employment. Wage growth was moderate overall with some districts seeing more modest increases.

The report also noted that prices increased at a modest pace and are expected to continue growing at a similar rate in the near future. The Beige Book is released two weeks before the Fed’s next monetary policy meeting, scheduled for June 11-12. CME Group’s FedWatch Tool predicts a 99.1% chance that the Fed will keep interest rates unchanged at the meeting.