Beige Book: Tariff pressures mount, flat outlook  

All districts reported “experiencing modest to pronounced input cost pressures related to tariffs, especially for raw materials used in manufacturing and construction.”

Manufacturing activity ticked down, reflecting economic uncertainty, deferred capital spending, and softening demand. Labor markets saw some improvement. Employment ticked up slightly, with cautious hiring and growing reliance on automation and AI to offset labor shortages.

On balance, the outlook remains largely pessimistic. Most Districts expect flat or slightly weaker activity ahead, with only two anticipating growth.

Prices

Prices rose moderately over the month, a rather similar trend from the prior report. All districts indicated that higher tariff rates were putting upward pressure on costs and prices. However, respondents’ reactions varied. Many firms passed on at least a portion of cost increases to consumers through price hikes or surcharges, the report said. Some, though, held off raising prices due to “growing price sensitivity” from customers.

Here’s a snapshot of what some districts are saying:

New York

Economic activity continued to decline modestly as heightened uncertainty hindered decision-making. Employment was up slightly, and wage growth was modest. Selling price increases remained moderate, while input prices rose steeply with widespread tariff-related cost increases.

Philadelphia

Business activity continued to decline modestly in the current Beige Book period. Activity fell moderately for nonmanufacturers but edged up slightly for manufacturers. Employment declined slightly, while wages increased slightly. Prices rose modestly after moderate growth last period. Generally, firms expect slight growth over the next six months, although economic uncertainty remains.

Atlanta

The economy of the Sixth District was little changed. Labor markets and wages were steady. Prices rose moderately. Consumer spending softened, but travel and tourism increased modestly. Residential and commercial real estate activity declined. Transportation activity grew modestly. Loan growth was flat. Manufacturing was flat, but energy activity rose moderately.

Chicago

Economic activity increased slightly. Employment increased modestly; consumer spending, business spending, and construction and real estate activity were flat; manufacturing declined slightly; and nonbusiness contacts saw no change in activity. Prices rose moderately, wages rose modestly, and financial conditions loosened slightly. Prospects for 2025 farm income were unchanged.

Kansas City

Economic activity in the 10th District was mostly unchanged, with some rebound in consumer spending and financial activities. Labor availability was reportedly much higher, which lowered expected wage pressures for the remainder of the year. Prices rose at a moderate pace.

Dallas

Economic activity in the 11th District economy was up slightly over the reporting period. Non-financial services activity grew modestly, and manufacturing production held steady. Loan volumes expanded, while oil production was flat, retail sales declined, and the housing market weakened. Employment was unchanged and price pressures held steady. Outlooks remained pessimistic.

San Francisco

Economic activity was largely stable. Employment levels were slightly lower. Wages grew at a slight pace and prices increased modestly. Retail sales expanded modestly, and consumer and business services demand eased. Conditions in manufacturing, and residential real estate markets weakened somewhat. Lending activity and conditions in agriculture were largely unchanged.