Fed Beige Book sees modest US growth amid uncertainty

The Federal Reserve said Wednesday that US economic activity grew modestly from early July, but that high energy prices, policy issues and the Iran war were adding uncertainty and weighing on businesses and households.

In its Beige Book survey, the Fed said consumer spending rose slightly. It said high inflation had made consumers more price-sensitive, while high-end purchases remained solid, a pattern economists have described as a “K-shaped” economy in which lower-income households cut spending while higher-income consumers keep buying.

Prices rose in all 12 Fed districts, according to the survey. Two-thirds reported moderate increases, while the St. Louis district reported a robust rise. Input price pressures were high in manufacturing and construction across multiple districts.

The Fed said manufacturing activity increased across most of the country, with data center-related orders and defense-sector demand prominent. Construction activity in several districts was also concentrated in data centers.

The report was released before a mid-September meeting of the Fed’s rate-setting committee. Fed Chair Kevin Warsh said last week there was “work to do” on inflation and that he did not see evidence that core trends were moving in the right direction. The Fed’s preferred inflation gauge was 3.7 percent in July, down from 4.1 percent in May and above the Fed’s 2 percent long-term target.