WASHINGTON— Economic activity in the U.S. expanded at a modest pace from mid-May through mid-July, but there are growing signs of a slowdown, according to the latest data released by the Federal Reserve as part of its Beige Book.
Of note, five of the Fed’s district banks shared concerns over an increased risk of a recession, NAFCU pointed out in its analysis.
According to the Fed, more of its district banks reported consumer spending moderated as higher food and gas prices diminished households’ discretionary income. Housing demand weakened noticeably as growing concerns about affordability contributed to non-seasonal declines in sales, resulting in a slight increase in inventory and more moderate price appreciation, the Beige Book states.
“Businesses are growing more pessimistic as the Fed looks to curtail demand in the face of stubborn inflation,” said NAFCU Chief Economist and Vice President of Research Curt Long. “Coupled with today’s CPI release, which showed higher-than-anticipated inflation in June, more employers are likely to reduce hiring as the likelihood shrinks of the Fed achieving a soft landing for the economy.”
Additional Insights
Other insights from the latest Beige Book include:
- Loan demand was mixed across the districts, with some financial institutions reporting an increase in customer usage of revolving credit lines and others reporting a weakening in residential loan demand amid higher mortgage interest rates
- The outlook for future economic growth was mostly negative among reporting districts, with contacts noting expectations for further weakening of demand over the next six to 12 weeks
- Most districts continued to report that employment rose at a modest to moderate pace and conditions remained tight overall. However nearly all Districts noted modest improvements in labor availability amid weaker demand for workers, particularly among manufacturing and construction contacts