Beige Book shows concerns about trade policy

The Beige Book is a summary report of commentary on current economic conditions across the Federal Reserve’s 12 districts.

Manufacturing was mixed, but two-thirds of districts said activity was little changed or had declined. The energy sector experienced modest growth.

“The outlook in several districts worsened considerably as economic uncertainty, particularly surrounding tariffs, rose,” the report stated.

Non-auto consumer spending was lower overall, but most districts saw higher sales of vehicles and nondurable items as more consumers rushed to purchase ahead of tariff-related price increases.

Prices

Prices increased across districts, with six characterizing price growth as modest and six characterizing it as moderate, similar to last month.

Companies across most districts expected tariffs to drive up costs, and many firms have already received notices from suppliers that costs would be increasing, the report found.

Firms reported adding tariff surcharges or shortening pricing horizons to account for uncertain trade policy.

“Most businesses expected to pass through additional costs to customers,” the report stated. “However, there were reports about margin compression amid increased costs, as demand remained tepid in some sectors, especially for consumer-facing firms.”

Below is a summary of five of the districts, with a focus on manufacturing.

Atlanta

The Atlanta district’s economy grew slightly. Employment was flat, while wages, non-labor costs, and firms’ prices increased modestly. Retail sales fell slightly, and travel and tourism declined modestly. Home sales rose modestly, but commercial real estate softened. Manufacturing declined. Energy activity rose slowly.

Chicago

Economic activity was little changed. Consumer spending rose modestly; employment and construction and real estate activity were up slightly; manufacturing was flat; business spending declined slightly. Prices increased modestly, wages rose slightly, and financial conditions tightened. Prospects for 2025 farm income were unchanged.

Minneapolis

Economic activity was lower. Employment declined and labor demand continued to soften. Wage growth was modest, and price increases were moderate. Consumer spending was lower with some exceptions. Manufacturing experienced modest improvements. Construction activity fell overall. Commercial real estate was mostly unchanged, and home sales declined. Agricultural conditions remained weak.

Dallas

Growth slowed to a slight pace. Manufacturing and oil field activity rose modestly. Commercial real estate activity was steady, while housing demand remained tepid. Employment increased, and input cost pressures accelerated. Outlooks deteriorated as heightened uncertainty surrounding domestic and trade policy hindered firms’ ability to plan.

San Francisco

Economic activity slowed slightly. Employment fell slightly. Wages grew slightly, and prices rose modestly. Demand for business and consumer services and for retail goods weakened. Activity in manufacturing and residential and commercial real estate markets softened. The economic outlook worsened materially.