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Fed’s Beige Book Says Holiday Spending Met or Exceeded Expectations

Federal Reserve building

Economic activity in the United States remained relatively stable from mid-November through December. 

While a majority of the 12 Federal Reserve Districts reported little or no change in economic activity, three noted modest growth, and one reported a moderate decline, the Federal Reserve said Wednesday (Jan. 17) in a national summary of its January 2024 Beige Book

Consumer spending provided some relief during the holiday season, with consumers meeting expectations in most districts and exceeding expectations in three districts, according to the summary. 

Strong holiday spending on apparel, toys and sporting goods was observed in New York, the summary said. Additionally, seasonal demand boosted airfreight volume from eCommerce in Richmond and credit card lending in Philadelphia. Increased leisure travel was also noted in several districts. 

However, manufacturing activity experienced decreases across most districts, and high interest rates continued to limit auto sales and real estate deals, per the summary. 

Despite these challenges, the prospect of falling interest rates was seen as a source of optimism in various sectors, according to the summary. On the other hand, concerns about the office market, weakening overall demand and the 2024 political cycle were cited as sources of economic uncertainty. 

Labor markets showed little net change in overall employment levels, with modest to moderate job growth reported in four districts, the summary said. While some districts noted a tight labor market, signs of a cooling labor market were observed in most districts. 

Wage growth was characterized as moderate in some districts, while others reported more modest or slight growth, per the summary. Firms in many districts expected wage pressures to ease and wage growth to decrease further in the coming year. 

Price increases were generally slight or modest, with some regions noting a subsiding of overall price pressures, according to the summary. 

Steady or falling input prices were reported by firms in most districts, particularly in the manufacturing and construction sectors, the summary said. Increased consumer price sensitivity forced retailers to narrow profit margins and resist suppliers’ efforts to raise prices. Property and casualty insurance premiums, as well as health insurance costs, continued to impact most firms. 

Looking ahead, most districts indicated positive or improved expectations for future growth among their firms, per the summary. 

PYMNTS Intelligence has found that small- to medium-sized businesses (SMBs) saw signs of recovery at the end of 2023, after coping with high prices and moderate growth for most of the year. 

Nearly half of U.S. Main Street SMBs said they expected their revenues to grow in 2023, according to “Main Street Health Q4 2023,” a PYMNTS Intelligence and Enigma collaboration.