The U.S. economy grew at a moderate pace in the third quarter, with a number of regions reporting flat or declining activity, the Federal Reserve said in its Beige Book survey of regional business contacts.
Employment also rose slightly, according to Wednesday’s report. Job turnover has decreased and contacts in several districts plan to be more selective in hiring and not fill all vacant positions.
The latest edition of the Beige Book was compiled by the Federal Reserve Bank of Richmond based on information collected through July 8. The report includes anecdotes and commentary on business conditions in each of the Fed’s 12 districts.
Of the districts, five reported stable or declining economic activity, three more than in the previous period. Looking ahead, businesses expected the slowdown to continue. “Expectations for the future of the economy were for slower growth over the next six months due to uncertainty surrounding the upcoming elections, “domestic politics, geopolitical conflict and inflation,” the report said.
Wages grew at a slight to moderate pace in most districts, although prices rose modestly overall. Consumer spending showed little or no change.
Nearly all districts “mentioned that retailers are offering discounted items or that consumers are only buying essential products, cutting back on quality, buying fewer items or looking for the best discounts,” the report said.
Numerous Fed members, led by its chairman, Jerome Powell, have said in recent weeks that The central bank is making some progress in bringing inflation down toward its 2% target, though it has been vague about the timing of interest rate cuts.
“While I don’t think we’ve reached our final destination, I do think we’re getting close to the point where a cut in the policy rate is warranted,” Fed Governor Christopher Waller said Wednesday.
Although the unemployment rate remains relatively low at 4.1%, it has risen in each of the past three months.. It has risen from a low of 3.4% hit in 2023. Signs of weakening in the labor market have raised concerns that it could falter under pressure from Fed policy.
Inflation, meanwhile, was moderate in the second quarter, after an unexpected rebound in the first three months of 2024. The core consumer price index, which excludes food and energy costs, rose just 0.1% in June, the smallest monthly advance since 2021.
Fed bankers say the recent moderation in the labor market means they will be vigilant about concerns about both full employment and price stability.
The Federal Open Market Committee is widely expected to keep its benchmark rate steady in July, marking one year since rates hit the current target range of 5.25% to 5.5%. Investors were betting on at least two cuts before the end of 2024, starting in September, according to futures.
