Economic activity increased across most parts of the United States during late May and June, while inflationary pressures eased slightly, according to the Federal Reserve’s latest assessment of business conditions.
The Fed’s Beige Book, released on Wednesday, July 15, found that economic activity expanded at a slight-to-moderate rate in 11 of its 12 regional districts. One district reported that conditions were broadly unchanged. The findings suggested the economy was continuing to grow ahead of the central bank’s next monetary policy meeting.
Businesses generally expected the expansion to continue over the coming months. However, companies in several regions remained uncertain about fuel costs amid renewed conflict between the United States and Iran.
The survey was based on information collected from businesses, community organisations, economists and market participants on or before July 6. It therefore captured a period when hostilities in the Middle East had temporarily eased and energy prices had declined.
A preliminary peace agreement between Washington and Tehran had helped lower fuel prices and contributed to softer US inflation readings in June. However, renewed hostilities during July have since pushed oil prices higher, reviving concerns that energy costs could again increase inflation.
The Beige Book found that price growth was either unchanged or slower than in the previous reporting period across all 12 Federal Reserve districts. Prices nevertheless continued to rise moderately overall, with nine districts reporting moderate increases, two recording robust growth and one noting only slight growth.
The outlook for inflation varied across the country. Some businesses expected price pressures to remain at their current level, while others predicted inflation would ease further, partly because of lower fuel costs.
Non-labour expenses continued to increase in industries including manufacturing, construction and services. Businesses attributed those higher costs to energy, transportation, raw materials, tariffs and disruption linked to the Middle East conflict.
Some companies said input costs were rising faster than the prices they could charge customers, putting pressure on profit margins. Consumers were also becoming more sensitive to price increases and, in several regions, were reducing discretionary purchases or switching to less expensive products.
Consumer spending rose slightly overall, although elevated fuel expenses limited spending in other areas. Car sales were broadly unchanged, but vehicle-repair activity increased as households kept their existing cars for longer.
Tourism performed more strongly, supported in several cities by visitors attending the 2026 FIFA World Cup. Federal Reserve districts covering Boston, Philadelphia, Miami, New York, Kansas City and the West Coast reported increased activity connected to the tournament.
Bars in the Greater Boston area recorded a notable rise in beer sales, which businesses attributed to World Cup matches and visitors.
Manufacturing output expanded at a modest-to-moderate pace in most regions. Stronger demand came particularly from the data-centre, defence and machinery sectors. Several manufacturers also reported more frequent supply-chain disruptions.
Construction and real estate activity increased slightly, supported partly by continued development of data centres. Oil and gas drilling also expanded, while agricultural conditions weakened because of lower commodity prices, rising operating expenses and tighter access to credit.
The labour market also showed signs of improvement. Employment increased overall, with five districts reporting modest, moderate or strong job growth. The other seven districts recorded little or no change.
Hiring increased in manufacturing, construction and retail, although businesses continued to report difficulties finding skilled technicians and tradespeople. Wage growth remained modest to moderate in most regions and did not appear to be a major source of inflationary pressure.
Some employers resisted workers’ requests for higher pay. Businesses in the Memphis area, for example, reported that wages had not been increased during the previous three months despite employees seeking raises.
The Minneapolis Fed said jobseekers were encountering fewer vacancies across many occupations. However, applicants looking for work as nursing assistants, machinery operators, stockers and customer-service representatives had relatively better employment prospects.
Several districts also reported that businesses were increasing their use of artificial intelligence. Companies were applying AI to screen job applicants, manage recruitment and improve employee productivity.
Financial conditions were broadly stable. Both commercial and consumer lending increased modestly, while the quality of business loans remained steady. Consumer loan performance weakened slightly.
The report comes as Federal Reserve policymakers continue to evaluate whether interest rates must remain elevated—or rise further—to ensure inflation returns sustainably to the central bank’s target.
At the Fed’s June 16–17 meeting, approximately half of policymakers projected at least one interest-rate increase before the end of 2026. Persistent inflation remains a concern even though the latest data and regional survey indicated some cooling in price pressures.
Federal Reserve chair Kevin Warsh has not publicly disclosed his preferred path for interest rates. During congressional appearances on Tuesday and Wednesday, however, he repeated his commitment to restoring price stability and said the central bank had the necessary tools to control inflation.
Overall, the Beige Book portrayed an American economy that was gradually strengthening, with improving employment, expanding manufacturing and slightly slower inflation. Nevertheless, tariffs, fuel prices and geopolitical uncertainty remain important risks to the outlook.
