Fed Beige Book "Demand Slows in Some Regions... Growing Concerns Over Recession Risk"

[Asia Economy New York=Special Correspondent Joselgina] The United States central bank, the Federal Reserve (Fed), stated on the 13th (local time) that the economy is slowing down across the U.S. and concerns about recession risks are increasing. It also forecasted that inflationary pressures in the U.S., at the highest level in over 40 years, will persist at least until the end of the year.

In the economic conditions report "Beige Book" released that day, the Fed said, "The U.S. economy is expanding at a modest pace recently," but also noted, "Signs of demand slowdown are growing in some regions, and concerns about recession risks are increasing in five districts."

This assessment covers the economic conditions in the 12 Federal Reserve Banks' jurisdictions since mid-May and will be used as basic data for the July Federal Open Market Committee (FOMC) regular meeting held over two days starting on the 26th.

The Beige Book reported, "In most regions, household incomes have decreased due to rising food and energy prices, leading to a decline in consumer spending." Inventories have accumulated, and new car sales were sluggish in most areas. Manufacturing activities also faced difficulties in many regions due to supply chain disruptions and labor shortages. It also included that housing demand showed a noticeable weakness amid growing economic concerns.

On the other hand, the overall labor market was still assessed as tight. However, labor demand in manufacturing and construction sectors weakened in most regions, and wage increases continued. About a quarter of the regions expected wage growth rates to remain high over the next six months, while some regions anticipated that wage increase pressures would ease in the latter half of this year.

Concerns about inflationary pressures were also expressed. The Beige Book stated, "Food, raw materials, and energy prices remain at significant levels," adding, "Although the rate of increase has slowed in recent months, it remains historically high." It further added, "In most regions, these inflationary pressures are expected to persist at least until the end of the year."

On the same day, the U.S. Department of Labor announced that the Consumer Price Index (CPI) for June surged 9.1% compared to the same month last year. This figure exceeds the previous month's (8.6%) largest increase since December 1981 and is higher than the expert forecast of 8.8%. With the inflation peak not clearly confirmed, the Fed's tightening measures are gaining momentum.

According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds (FF) futures market on that day reflected a 76.2% probability of a 1.0 percentage point rate hike in July. This is a sharp increase from 0% a week ago and 7.6% the day before.

This content was produced with the assistance of AI translation services.