Fed "US Economic Activity Slightly Expands... Number of Improving Regions Increases from 8 to 10"

Fed Releases March Economic Activity Report
"Inflation Moderates... Economy Outlook Optimistic"

Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), has effectively signaled a delay in interest rate cuts, while the Fed assessed that overall economic activity in the U.S. showed slight expansion since the end of February.

[Image source=Reuters Yonhap News]

On the 17th (local time), the Fed released the 'Beige Book,' a report on economic trends, stating that "overall economic activity has expanded slightly, on balance, since the end of February."

The Beige Book is a report evaluating economic conditions in the 12 Federal Reserve Bank districts and serves as foundational material for the Federal Open Market Committee (FOMC) regular meeting scheduled from the 30th of this month to the 1st of next month.

The report evaluated that out of the 12 districts, 10 showed slight or modest economic growth. In the previous Beige Book, 8 districts showed economic growth, so this time the number increased by 2. The remaining 2 districts showed no change in economic activity.

Regarding consumer spending, which has supported the strong U.S. economy, the report viewed that overall it barely increased. Consumption trends varied by region and spending category. As consumer cost sensitivity rose, discretionary spending slowed in some regions, while automobile spending increased noticeably in others. This somewhat contrasts with recent robust retail sales and inflation indicators that have pushed back the timing of interest rate cuts this year.

By industry, tourism activity improved somewhat, while manufacturing activity decreased slightly. Non-financial services activity increased modestly, and residential construction also improved. Conversely, non-residential construction stagnated, and commercial real estate leasing decreased slightly.

The Beige Book described the economic outlook as "cautiously optimistic."

Regarding the labor market, employment increased very slowly or modestly in 9 of the 12 districts. Three districts saw no change. Wages increased modestly in 8 districts, while in the remaining 4 districts wage increases were slight or modest. The Beige Book stated, "On balance, labor demand and supply remain relatively stable, and further job gains and wage increases are expected to continue to moderate toward pre-pandemic levels."

Inflation was assessed as moderate on average and proceeding at the same pace as in the previous report. Although there were some delivery delays due to the Red Sea incident and the Baltimore bridge collapse, these have not yet led to widespread price increases. The report also noted that in recent months, companies’ passing on of cost burdens to consumers has weakened.