Fed Beige Book Finds Tax Refund Relief Running Into Higher Gas Prices

The Federal Reserve’s latest Beige Book, released Wednesday (April 15), describes an economy that keeps growing even as businesses and households navigate mounting uncertainty and uneven financial conditions.

Across the 12 Federal Reserve Districts, activity advanced modestly in most regions, with hiring and spending holding broadly steady. But aggregate stability obscures real divergence underneath.

The report’s tone reflects a more constrained operating environment than the headline numbers imply. Businesses told Fed researchers that uncertainty is already reshaping hiring plans, production decisions and capital deployment, even in districts where overall activity remains intact.

Uneven Momentum by Household Income

The Beige Book’s value lies in its qualitative detail. Rather than focusing on aggregate data alone, the report draws from interviews and surveys with business leaders, economists and community organizations. That approach captures how firms and consumers are adjusting behavior in real time.

Demand tied to higher-income consumers remains comparatively strong, supporting sectors such as luxury retail, travel and wealth management. At the same time, businesses serving broader consumer segments report more cautious spending patterns, with households prioritizing essential purchases and trading down on discretionary items.

This divergence appears in pricing dynamics as well. Many firms noted that input costs continue to rise faster than selling prices, compressing margins. These pressures extend beyond energy and are in some cases compounded by tariff-related costs. Businesses expect that some of these increases will be passed through over time, particularly if demand stabilizes.

Narrower Margins, Higher Uncertainty

For companies, the operating environment appears more constrained. The Beige Book’s anecdotal evidence aligns with broader sentiment data showing declining optimism and elevated uncertainty among small business owners.

Reports indicate that higher input costs, combined with limited pricing power, are placing pressure on margins. Smaller enterprises are also more exposed to fluctuations in consumer demand, particularly when spending shifts toward essentials. These conditions are contributing to cautious hiring and investment decisions, even in districts where overall activity continues to expand.

Prices and Consumer Demand Reflect Growing Caution

The interaction between prices and demand remains a central concern. Businesses report that consumers are increasingly sensitive to price increases, especially in categories beyond necessities. Several contacts of the Fed noted that elevated fuel costs could offset any temporary boost from tax refunds, reinforcing a conservative spending posture.

“Most firms did not plan to raise prices in the near term, but contacts noted that the pricing outlook was hazy owing to recent cost shocks and lingering uncertainty related to tariffs,” the report stated. At the same time, inflation pressures remain embedded in supply chains.

Households Show a Widening Financial Divide

The Beige Book’s findings complement PYMNTS Intelligence that debuted last month by highlighting a pronounced divide in household financial conditions. A 15-point gap separates consumer confidence among households earning more than $150,000 annually and those earning less than $50,000, a difference that has persisted for several months.

Higher-income households remain in positive territory, with stronger savings, greater emergency liquidity and sustained confidence in their financial outlook. By contrast, lower-income households operate with limited financial buffers. Their confidence in managing debt remains relatively stable, but that stability masks a lack of savings and limited capacity to absorb unexpected expenses.

The disparity is particularly evident in emergency readiness. Households at the top of the income distribution report significantly higher confidence in covering short-term financial shocks, while those at the lower end remain close to or below neutral levels.

Credit Access and Financial Flexibility Remain Uneven

The Beige Book offers limited direct commentary on credit conditions, but the broader picture suggests uneven access and flexibility. Businesses report cautious lending environments in some districts, while consumers at lower income levels face tighter constraints in managing cash flow.

PYMNTS Intelligence data adds further context. While job security remains relatively high across income groups, confidence in the ability to replace income varies sharply. Lower-income workers report significantly lower job mobility, indicating that a disruption in employment would have immediate consequences for spending behavior.

This combination of stable employment and limited flexibility creates a fragile equilibrium. Spending can hold as long as income remains steady, but the margin for error is narrow.

Business sentiment is also strained, but not to the same extent. As recently reported by PYMNTS, the NFIB Small Business Optimism Index stood in March close to the historical average of 98 (currently at 95.8. In fact, March was the first time it fell below that benchmark since April 2025.