Beige Book finds mixed demand trends, tariff concerns

Manufacturing activity exhibited slight to modest increases across a majority of districts. However, manufacturers expressed concerns over the potential impact of looming trade policy changes between late January and February.

“Residential real estate markets were mixed, and reports pointed to ongoing inventory constraints,” the Beige Book found. “Construction activity declined modestly for both residential and nonresidential units. Some contacts in the sector also expressed nervousness around the impact of potential tariffs on the price of lumber and other materials.”

The report found consumer spending was lower on balance. There was solid demand for essentials. But there was also rising price sensitivity for discretionary items, particularly among lower-income shoppers.

Prices

Prices rose moderately in most districts, but several saw an uptick in the pace of increase relative to the previous reporting period.

Input price pressures were generally greater than sales price pressures, particularly in manufacturing and construction, the report found.

“Reports of substantial increases in insurance and freight transportation costs were also widespread. Firms in multiple districts noted difficulty passing input costs on to customers,” the Beige Book found. “However, contacts in most districts expected potential tariffs on inputs would lead them to raise prices, with isolated reports of firms raising prices preemptively.”