Fed Beige Book Finds Modest Growth Led by Data Centers

The Federal Reserve's Beige Book found modest US economic growth over the past two months, driven by manufacturing supported by data-center and defense orders. However, data-center construction remains tight on labor availability in some areas. Consumer price sensitivity is high, with prices increasing moderately and affecting household budgets.

Manufacturing showed overall growth across most Federal Reserve districts, with data-center and defense spending playing key roles. Labor demand remains mixed, strengthening in manufacturing, construction, and some services while weakening in retail and hospitality. Prices have risen moderately, but businesses have been unable to pass these increases to consumers in most sectors.

Consumer-facing businesses face heightened price sensitivity, limiting their ability to raise prices. Some regions, such as Atlanta, saw a shift towards value-driven private-label goods, while restaurants experienced lower spending per visit. Labor costs continue to rise in some areas due to factors like fuel, food, living costs, minimum wages, and unions.

Despite mixed sector sentiment, businesses are focusing on capital-intensive sectors for growth while dealing with tighter pricing power in consumer-facing categories.