Fed's Beige Book Notes Modest Economic Growth, Substantial Inflation

(RTTNews) - With the Federal Reserve's next monetary policy decision looming toward the end of the month, the central bank released its latest Beige Book on Wednesday.

The Beige Book, a compilation of anecdotal evidence on economic conditions in each of the twelve Fed districts, noted U.S. economic activity has expanded at a modest pace since mid-May.

However, the Fed said several districts reported growing signs of a slowdown in demand, with contacts in five districts noting concerns over an increased risk of a recession.

The report said most Fed districts reported that consumer spending moderated as higher food and gas prices diminished households' discretionary income.

On the inflation front, the Fed noted substantial price increases were reported across all districts, at all stages of consumption, although three quarters noted moderation in prices for construction inputs such as lumber and steel.

"Increases in food, commodities, and energy (particularly fuel) costs remained significant, though there were several reports that price inflation for these categories had slowed compared with recent months but remained historically elevated," the Fed said.

Meanwhile, the Beige Book said pricing power remained steady, with firms in some sectors, such as travel and hospitality, successfully passing sizable price increases on to customers with little to no pushback

The report also said most districts continued to report modest to moderate job growth, although nearly all districts noted modest improvements in labor availability amid weaker demand for workers, particularly among manufacturing and construction contacts.

The release of the Beige Book comes two weeks before the Fed's next monetary policy meeting on July 26-27, when the central bank is widely expected to raise interest rates by another 75 basis points.