Auto sales were mostly subdued through late August, with Federal Reserve contacts citing downbeat consumer confidence, high fuel prices and rising financing costs as factors dampening demand. The latest Beige Book suggests consumers are still spending, but becoming increasingly selective, with heightened price sensitivity creating pressure on big-ticket purchases such as vehicles. At the same time, solid high-end purchases point to a widening divide between consumers who remain comfortable spending and those increasingly constrained by affordability.
Economic activity increased modestly since early July, according to the Beige Book prepared at the Federal Reserve Bank of Minneapolis based on information collected on or before Aug. 24. Ten of the 12 Federal Reserve districts reported slight-to-moderate growth, while two reported no change. Consumer spending grew slightly on balance, tourism increased and airlines reported strong demand despite higher airfares. Manufacturing activity also picked up across most districts, supported in part by continued strength in defense and data center-related orders, while services activity increased slightly to moderately. Financial conditions improved slightly, with loan volumes remaining solid or increasing across most districts.
Residential construction declined while nonresidential construction increased on balance, with several districts citing data center projects. Agriculture conditions improved slightly but remained strained, particularly among crop producers. The outlook for the coming months was generally positive, although contacts cited heightened uncertainty surrounding higher energy prices, policy and international conflict.
