Home News Fed Report Indicates Little Change in US Economic Activity

Fed Report Indicates Little Change in US Economic Activity

Fed Report Indicates Little Change in US Economic Activity

U.S. economic activity was little changed in recent weeks as employment growth moderated somewhat and price increases appeared to slow, according to a Federal Reserve report published on Wednesday.

“Expectations for future growth were mostly unchanged as well; however, two districts saw outlooks deteriorate,” the U.S. central bank said in its latest “Beige Book” compendium of surveys and interviews conducted across its 12 districts through April 10. “Contacts expected further relief from input cost pressures but anticipated changing their prices more frequently compared to previous years.”

The Fed’s latest read on the state of the economy provides a snapshot of business, bank and worker conditions in the aftermath of the mid-March failure of two large regional banks that shook confidence in the U.S. financial sector and prompted an emergency response from regulators to contain the fallout.

Meeting less than two weeks after that crisis, Fed policymakers raised the benchmark overnight interest rate by just a quarter of a percentage point to the 4.75%-5.00% range despite what they continued to feel was unacceptably high inflation.

They also signaled they are nearing the end of what has been the most aggressive spate of policy tightening in 40 years, with most policymakers penciling one last quarter-percentage-point hike before what’s expected to be a prolonged holding period.

Overall Wednesday’s report delivered little to shift that trajectory: lending did decline, and elevated price pressures eased, but neither trend was dramatic or appeared to suggest an economy on the cusp of an economic downturn or a sharp rise in unemployment, now at the historically low level of 3.5%.


The report flagged declining lending volumes and loan demand for households and businesses and suggested last month’s bank failures are broadly expected to reduce the supply of credit in the months ahead.

In the San Francisco Fed district, where failed Silicon Valley Bank was located, “lending activity fell significantly in recent weeks amid higher interest rates and elevated uncertainty in the banking sector,” the report said.

Businesses in the region “had a weaker overall economic outlook,” and credit constraints along with reduced philanthropy made it more difficult for communities to provide food, shelter and services, the San Francisco Fed said.

But other districts were less shaken.

“Banking contacts reported some movement in deposits but little change in credit availability following the collapse of Silicon Valley Bank,” the Chicago Fed said.

The Cleveland Fed said concerns about banking industry developments “reportedly had limited impact on recent business activity, though a small share of contacts reported a modest decrease in credit availability.”


The report also suggested a mixed bag on the outlook for inflation and labor. Freight volumes were reported by several districts to have slowed, evidence of softening demand for goods and reduced demand for labor particularly in the transportation sector, among the top job creators since the pandemic.

“Trucking firms stated that in response to lower freight volumes, they were still adding drivers, but they had scaled-back recruiting and were being very selective in hiring,” the Richmond Fed said.

The Minneapolis Fed, which encompasses states where the labor market is among the tightest in the country, said that while mass layoff events were still low, one “Minnesota staffing firm said that businesses were ‘exfoliating the workers they don’t need.'”

Fed policymakers have long said they need to see softer labor markets to achieve lower inflation.

At the same time, most regions across the country reported “steady to increasing demand” for nonfinancial services, a potential warning sign that services inflation may continue to prove sticky.

“Buyers were reportedly winning more concessions compared to the last two years of a take-it-or-lose-it price environment,” the Atlanta Fed reported. But other costs, including for food an labor, “kept firms from passing easing cost pressures on to customers,” it said

The Fed targets 2% inflation as measured by the personal consumption expenditures price index, which in February rose 5% from a year earlier. Policymakers will get a fresh monthly read just days before their May 2-3 rate-setting meeting.

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