The Federal Reserve’s Beige Book, released on January 15, 2025, provides a comprehensive overview of the U.S. economy based on data collected up to January 6, 2025. The report indicates that economic activity increased slightly to moderately across the twelve Federal Reserve Districts in late November and December 2024.
Overview of Federal Beige Book
Consumer Spending
Consumer spending moved up moderately, with most Districts reporting strong holiday sales that exceeded expectations. Vehicle sales grew modestly during this period.
Manufacturing and Construction
Manufacturing activity decreased slightly on net, with several Districts noting that manufacturers were stockpiling inventories in anticipation of higher tariffs. Construction activity decreased overall, as high costs for materials and financing weighed on growth.
Real Estate
Residential real estate activity remained unchanged on balance, with high mortgage rates continuing to suppress demand. Commercial real estate sales edged up slightly during this period.
Nonfinancial Services
The nonfinancial services sector experienced slight growth overall. Notably, there was growth in leisure and hospitality, as well as transportation, particularly in air travel. However, truck freight volumes declined during this period.
Financial Services
Financial service providers reported modest growth in lending with little change in asset quality overall. However, lenders and community organizations expressed concerns about delinquencies among small businesses and lower-income households.
Agriculture and Energy
Agricultural conditions remained weak overall, with generally lower farm incomes and weather-related challenges in some areas. The spread of avian flu reduced egg supplies, leading to higher prices. Energy activity was mixed during this period.
Labor Markets
Employment ticked up on balance, with six Districts reporting slight increases and six reporting no change. Contacts in several service industries, notably healthcare, continued to see job growth. Construction employment increased slightly, while manufacturing employment remained flat. Contacts across multiple sectors noted difficulty finding skilled workers, though reports of layoffs were rare. Wage growth picked up to a moderate pace in most Districts, with some reports indicating that wage pressures had eased.
Prices
Prices increased modestly overall, with growth rates ranging from flat to moderate. Most Districts reported modest increases in selling prices, though there were instances of flat or decreasing prices, particularly in retail and manufacturing. Input costs also rose, with contacts highlighting higher insurance prices, especially for health insurance. Some contacts expected prices to continue rising in 2025, noting the potential for higher tariffs to contribute to price increases.
Business Sentiment
More contacts were optimistic about the outlook for 2025 than were pessimistic. However, contacts in several Districts expressed concerns that changes in immigration and tariff policy could negatively affect the economy.
Conclusion
The January 2025 Beige Book indicates a U.S. economy experiencing slight to moderate growth across various sectors. While consumer spending and certain service industries show positive momentum, challenges persist in manufacturing, construction, and agriculture. Labor markets exhibit modest improvements, though difficulties in finding skilled workers remain. Price levels have increased modestly, with future concerns tied to potential policy changes. Overall, the economic outlook for 2025 is cautiously optimistic, tempered by uncertainties surrounding policy developments.
