Fed Beige Book warns consumers to "run out of savings" as recession mentions hit five-year high

The Federal Reserve released the latest version of its Beige Book of the economy through Aug. 28 in the early hours of Thursday morning Beijing time. The report is released two weeks before each FOMC meeting.

The latest Beige Book shows that,The U.S. economy and job market grew more slowly in July and AugustMany companiesWage growth is expected to generally slow in the near termMost regional contacts say economic growth is moderate

Almost all regions said companies had "reconfirmed their previously unfulfilled expectations that wage growth will generally slow in the near term".

The Beige Book shows that the United StatesConsumer spending remains strongSpending on tourism and other services in particular, but also shows some signs of economic marginalizationSigns of weaknessSlowing demand for goods is weighing on manufacturing, while high interest rates continue to put pressure on the housing market, leading to supply shortages among consumers unwilling to forgo low-rate mortgages. Almost all regions reported that inventory of homes for sale remains limited.

Companies across the country say it is increasingly difficult to pass on higher costs to customers. The expansion of profit margins has ended, "contacts in several regions said input prices were growing at a slower rate than selling prices, making it difficult for companies to pass on cost pressures. As a result, profit margins fell in several regions."

In some regions, there is evidence that consumers haveDepleted excess savingsMost regions reported an increase in consumer loan balances, with some reporting an increase in consumer credit delinquency rates.

Last week's data showed that some parts of the labor market are cooling despite a general increase in employment in August. Wage growth was the slowest since early 2022, and while more people are joining the labor force, more and more people are unable to find work immediately.

Inflationary pressures also eased, with the core personal consumption expenditure index, the Fed's preferred measure of potential inflation, rising 0.2 per cent for the second straight month in July, down from more than 0.3 per cent earlier in the year.

According to the Beige Book, "Most districts reported that,Price growth has generally slowed, with the manufacturing and consumer goods sectors slowing even faster"However, contacts in several regions have highlighted that property insurance costs have risen significantly over the past few months".

Evidence of increased reliance on support services such as food banks is emerging in some areas. The San Francisco and Dallas Fed said such demand has increased, especially among the elderly, for whom inflation is a particular burden.

Fed officials are now acting more cautiously after raising interest rates at a positive pace last year and more tightening at most of their meetings this year. Policymakers' forecasts, released in June, showed two more rate increases this year, one of which was already implemented at the July meeting. Many officials have hinted that they may choose to pause the rate hike at this month's meeting to continue assessing progress in reducing inflation, though some said one or more increases may be needed to cool price pressures completely. Policymakers, while committed to reducing inflation, have also said they hope the Fed's actions will not unnecessarily stimulate a recession. Federal Reserve Chairperson Jerome Powell said last month at the central bank's annual meeting in Jackson Hole, Wyoming, that the central bank is prepared to raise interest rates further if needed and intends to keep borrowing costs high until inflation is steadily moving towards its 2 percent target.

according toIndustrial foreign exchangeAccording to statistics, the number of mentions of inflation in the Beige Book is the fewest since January 2022, while the mention of the word "slow" remains relatively high, and the number of mentions of economic recession has reached the highest level since at least 2018.