Fed Beige Book: "Economic Activity Stagnant Nationwide... Tariff-Driven Inflation Persists"

The U.S. Federal Reserve has reported that economic activity has stagnated across the United States while inflationary pressures have persisted. Analysts attribute this to the impact of President Donald Trump's tariff policies on the broader economy.

Reuters Yonhap News

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In its Beige Book, an economic conditions report released on the 3rd (local time), the Federal Reserve stated that "in most of the 12 Federal Reserve Districts, there was little change in economic activity compared to the previous report." The report added, "Consumer spending was flat or declined," and "in many households, wage growth did not keep pace with rising prices."

On the inflation front, moderate or modest price increases were observed in 10 out of the 12 Federal Reserve Districts. The remaining two districts reported significant increases in input costs. The report noted, "Most regions experienced price increases due to tariffs, which particularly affected the prices of input materials," and "price increases were also seen across industries such as insurance, utilities, and technology."

Companies have not yet fully passed on the burden of tariffs to consumer prices. The report stated, "Some companies have passed the entire increase in costs on to consumers, but the majority are hesitant to raise prices due to concerns about price sensitivity, weakened purchasing power, and potential business losses." Nevertheless, "most regions expect price increases to continue over the next few months, and three districts anticipate that the pace of increases will accelerate."

However, there were no clear signs of a slowdown in the labor market. Eleven districts reported little or no net change in employment levels, with only one district noting a slight decline in employment.

In contrast to the Beige Book, official government statistics show clear signs of cooling in the labor market. According to the Job Openings and Labor Turnover Survey (JOLTs) released by the U.S. Department of Labor on the same day, the number of job openings in July was 7.181 million, down by 176,000 from June's 7.357 million. This figure is also well below the market expectation of 7.38 million and marks the lowest level in ten months since September of last year. The uncertainty surrounding tariff policies is interpreted as making companies more cautious about new hiring.

The Beige Book is a report assessing recent economic trends in the 12 Federal Reserve Districts. The Federal Reserve will use this report as a reference for the upcoming Federal Open Market Committee (FOMC) meeting scheduled for the 16th and 17th. Following the release of the job openings data, concerns over a slowdown in the labor market have grown, and the interest rate futures market now reflects a more than 95% probability that the Fed will cut the current benchmark interest rate of 4.25% to 4.5% by 0.25 percentage points this month.

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