Beige Book: Modest Growth but Consumer Remains Strapped

The March 4 edition of the Federal Reserve’s Beige Book contained many of the same sentiments expressed in the previous release. Businesses are generally optimistic but rising costs continue to pressure margins.  Seven of the twelve Federal Reserve District banks reported modest improvement in economic activity. Two reported flat economic activity (Boston and St. Louis) and  three noted modest declines (New York, Minneapolis, and San Francisco). One theme that’s consistent across almost all of the Districts is that of the stressed consumer. Low to moderate income consumers are being particularly squeezed by high grocery, energy, and health care costs, with a notable pick-up in requests for food and housing assistance noted in several Districts. One contact in the New York District noted that even higher income consumers were price sensitive and that they “shopped across multiple outlets to find value”. The stress on consumers appears to be bleeding into auto sales, with most of the Districts reporting lower sales volumes, particularly for new cars. One respondent in the Cleveland District noted that lower to moderate income customers are essentially “priced out” of the new car market. Finally, the Richmond District reported weakening maritime activity, with respondents noting that “empty containers have started to pile up” and that "tariffs are finally starting to have an impact”. The next Beige Book is scheduled to be released April 15.